Profits at Middle East’s hotels hit lows in July

Dubai: Profits at hotels in the Middle East and Africa hit lows in July 2017 as demand remained soft during the summer months, and average room rates fell 12.7 per cent to $141.

According to the latest report from HotStats, low demand levels forced hoteliers in the Middle East and Africa to discount room rates in an attempt to attract customers. Occupancy levels only inched up 1 percentage point in July to 60.4 per cent.

As a result of the drop in prices and low volumes, revenues per available room at hotels dropped to a five-year low of around $85, surpassing the previous low of $93 recorded in June 2016, HotStats said.

Non-room revenues were also on the decline as food and beverage revenues fell 6.2 per cent in July, and conference revenues fell 1 per cent.

“Much to the disappointment of hotel owners and operators in the region, the challenging market conditions are likely to continue in the short term. This is not only due to the laboured recovery of the oil industry, but many of the new hotel developments which were either late in the planning stages or had already broken ground when the crisis hit, are now coming to fruition,” said Pablo Alonso, chief executive officer of HotStats, in the report.

Hoteliers and analysts in the UAE, for example, have long been citing strong supply especially in the higher end of the market as a factor that’s been pressuring room rates. This comes amid additional pressure on the demand side from slower economic growth.

HotStats said profit per room in hotels in the Middle East and Africa in July was at the lowest level recorded in recent years, and was nearly 52 per cent below the average for the 12 months to July 2017, at $74.

In Amman, however, hotels performed strongly, with a 7.8 per cent percentage point increase in room occupancy, which reached 60.8 per cent, offsetting the 6.9 per cent decline in average room rates (of $145).

The increase was a welcome respite for hotels in the Jordanian capital that have struggled to grow top and bottom line performance so far this year, with revenues per available room down 8 per cent year-to-date.