AHIC 2021 - That's a wrap!

It was another exciting year at the Arabian & African Hotel Investment Conference (AHIC) held ‘in person’ in Dubai on 21 – 23 September 2021. We have set out a brief wrap-up of some key trends discussed by hotel and hospitality industry leaders at AHIC this year:  

Positive Outlook for Hotels & Hospitality in the Middle East: Although demand and profitability are still trailing behind 2019 figures, the outlook is generally positive. Pre-pandemic profitability is projected to be achieved over the next 2 years owing largely to pent up demand across different market segments and with anticipated spikes during key regional events such as Expo and the World Cup. Notwithstanding current market conditions, investors remain interested in investing and developing hotels. There are approximately 170 hotels / 50,000 keys in the pipeline for Dubai with several projects under consideration.

COVID-19 Management: Collaboration between the public and private sectors has been essential to ensure effective management. Government policies and high vaccination rates have assisted hotels to operate in safer and more predictable conditions. By way of example, 91% of hotels in Dubai have reopened. Owners and operators continue to review their policies to ensure visitor and employee safety and brand standards are having to adapt. 

Re-segmentation and Re-purposing: Local tourism has played an important role in increasing occupancy and profitability. Owners and Operators are putting in place more targeted and localised marketing strategies. Hotels are becoming more integrated within the community fabric and are evolving to attract day visitors to use facilities and idle spaces. For example, Hamza Khan of Letswork explained how their product activates under-utilised assets, such as hotel lobbies, into co-working and meeting spaces.

Alternative Structures: The traditional hotel management structure remains the most common form of agreement utilised in the Middle East. However, the interest in alternative structures, particularly franchises, continues to rise. Paul Saba, VP & Senior Counsel at Marriott, highlighted that approximately 50% of Marriott’s hotels are operating under a franchise model. The majority of franchised hotels in the Middle East do not engage third party operators (TPOs) and manage the franchised hotels directly. However, the combined franchise and TPO structure is more common in markets such as Africa and Europe. Hotel operators are still reluctant to offer franchises of luxury and lifestyle brands but are extended some franchises into branded residential apartments.

Sustainability: The importance of sustainability and the role of the industry was stressed throughout AHIC. There was a unified message across a number of international hotel operators such as Accor, IHG and Marriott, about the need to adopt sustainable practices. Recent surveys (including Booking.com’s Sustainability Report 2020) show a continued trend in traveller preference towards sustainable travel. Anton Bawab, Head of Operations at the Red Sea Development, spoke passionately about the industry’s ability to drive change through implementing sustainable practices and responsible decision making. He shared an example about how they abandoned development plans on one of their most beautiful islands after discovering it was a discover it was a nesting ground for hawksbill turtles.

Experiential Travel: The demand for experiential and immersive travel has continued to accelerate and this remains a key trend in the industry. The Middle East is defining its own narrative in this space with a number of curated experiences being developed. For example, Amr Al Madani, CEO of the Royal Commission for AlUla highlighted their strategy towards developing immersive experiences for travellers and a community-centric approach. ENVI Lodges, a hotel management company founded by Chris Nader and Noelle Homsy was also launched at AHIC and offers luxury eco-lodging concepts with minimal impact on the surrounding environment.

Technology: COVID-19 has accelerated the use and integration of technology within the hotel and hospitality industry. Owners have had to inject additional capital expenditure over the past 18 months to upgrade hardware and software. These include guest-facing technology such as virtual check-in, keyless entry and QR coding as well as back-office/asset management tools to enhance efficiencies and the interpretation of data.

Finance: There have been a limited number of hotels that have been repossessed. Banks have been monitoring and working with owners to restructure and strategise debt. Liquidity is availability but banks appear to be more selective about the type of asset they are financing and the borrower’s profile.

We will be exploring some of these trends in further detail in our upcoming hotels & hospitality article mini-series. In the meantime, please feel free to contact Simon Green or Reem Al Mahroos for further details.