Hospitality sector's mood is upbeat

Dubai:  The mood in the Middle East and North African (Mena) hospitality sector is upbeat despite some projects stalling as the region is forecast to grow between 4 and 5 per cent over the next two years.

"A more positive outlook is palpable in our survey compared to the one we did for the ITB [International Travel Bourse, held in Berlin in March every year]," said Jonathan Worsley, board director, STR Global, chairing this year's Arabian Hotel Investment Conference (AHIC).

Around 76 per cent of the more than 600 delegates and non-delegates voting during the AHIC pre-conference survey expressed an upbeat sentiment. And 82 per cent foresee a sustainable recovery of the industry in 2012.

While the decline in the average rate was seen as the most pertinent effect of the crisis, the majority, 87 per cent voted for the Mena region to offer the best opportunities.

"The Mena region is the second fastest growing region, after Asia, in the world. A growth of 4 to 5 per cent is forecast over the next two years," Nenad Pacek, founder and president of Global Success Advisors, said.

The forecast is based on the strong fundamentals such as $1.6 to $2 billion of cash reserves this region is sitting on.

Little debt

"There is little public and external debt in the region. Lebanon may often be defying weak fundamentals, Egypt does have high debt and Kuwait, as well as Dubai, went through a recession, but most places in the region are doing well," he added.

The only caveat, he added, was a high dependency on oil revenues, warning that prices have historically not developed by the world's need but rather speculation.

"As long as the price hovers around the $70 to $80 mark everyone feels comfortable with, bar Iraq and Iran who would need $90 to balance their budgets, all is well," said Pacek.

The positive economic outlook still represents a slowdown. It is not the time to hectically launch new developments, but the tide has turned to mergers and acquisitions and management of existing assets, speakers established.

The Wyndham Group is positive it will continue to carry out brand acquisitions. "Banks are in control of assets and held on to them because the prices were too low," said Eric Danziger, the group's president and CEO.

Kingdom Hotel Investments (KHI) meanwhile made Fairmont Raffles more asset light and sought new money. "The Qatari government as new shareholders strengthen our shareholding to engage in a more offensive growth of our pipeline," CEO Sarmad Zok said.

Jones LangLaSalle's latest pulse of the regions' hotel industry also points to the market converting from a development to an investment-led market. The report noted early signs that more hotel owners are seeking to attract capital by way of outright or partial sale and joint ventures.

"Banks are still slow to lend. Owners have to work very hard to get funding in place. We used to be able to get a hotel up and running within two to three years," said Gerald Lawless, executive chairman of Jumeirah Group.