HOTELIER MIDDLE EAST - TRI Consulting Consulting... · • Hotel Rebranding HOTEL MANAGEMENT CONTRACTS TRI provides development input for all phases of the development cycle but is

HOTELIER MIDDLE EASTGeneral Manager DebateMarket PresentationSeptember 2018

Christopher HewettDirector – TRI Consulting

1,300+Assignments

conducted across the region

30Operational Reviewsconducted since 2015

20 yearsAdvising clients in the

GCC, Middle East & Globally

75+Years of combined experience in TRI’s team of advisors

50Countries covered in

the Middle East, Europe, Asia and

Africa

TRI CONSULTINGKEY FACTS

Strategic planning is an essential component of the real estate developmentcycle. TRI Clients with strategic planning assistance in the following areas:

• Tourism master plans• Sector reviews• Identifying potential investment and/or conversion opportunities• Rationalising existing property portfolio and branding• Competitive benchmarking• Custom market research

Our involvement can range from providing a one time detailed review withrecommendations to a bespoke engagement over an extended period.

STRATEGIC PLANNING

Over the past decade, the process of selecting and negotiating hotelmanagement contracts with hotel companies across the Middle East hasbecome more sophisticated, complicated and competitive. We understandmanagement company branding, contract structure, major commercial termsand other owner and operator obligations. Our services include:

• Hotel operator search and selection• MOU / LOI review and negotiation• Hotel management agreement review and negotiation• Technical service agreement review and negotiation• Franchise agreement review and negotiation• Hotel Rebranding

HOTEL MANAGEMENT CONTRACTS

TRI provides development input for all phases of the development cycle but isparticularly renowned for the preparation of independent and objective marketand financial feasibility studies.

These reports are prepared in a form suitable for presentation to traditionalsources of finance and other relevant third parties, such as equity participantsand hotel operators. Our services include:

• Market and financial feasibility studies• Highest and best use studies• Market studies• Pre-feasibility studies• Site analyses• Financial analysis and cash flow modelling

PROJECT DEVELOPMENT

TRI has been commissioned to provide consulting services for existing hotel,resorts and real estate projects. These services are typically commissioned inorder to assist our clients with asset enhancement, increased cash flow andimproved value. These services include:

• Advice on asset acquisition and disposition• Operator performance and compliance reviews• Operational reviews• Business valuations• Asset enhancement and capital expenditure evaluation

ASSET MANAGEMENT

TRI CONSULTINGDEVELOPMENT SERVICES

REGIONAL DRIVERS AND FACTORSFACTORS IMPACTING TOURISM IN THE REGION

IRAN• Currency Depreciation,• New U.S. Sanctions

OMAN• Evolving Air Industry • New Muscat Terminal • Duqm Airport• New e-Visa Policy• New Short-Stay Visas (2018)

SAUDI ARABIA• Introduction of VAT• Evolving Entertainment Industry• Social Reforms• Planned Tourism Developments • Tourist Visas

TURKEY• Currency Depreciation • Political Conflicts• Safety Concerns

EGYPT• IMF-backed Economic Reforms• Rising Visitor Arrivals • Improved Tourism Revenues

BAHRAIN• New Oil Discovery• Infrastructure Development

UAE• Introduction of VAT• VOA – Russia & China• Transit Visas

LEBANON• Political Uncertainty• Economic Stagnation• Rising European Tourists• Declining GCC Visitors

KUWAIT• Project Delays• Evolving Air Industry• VAT delay– 2021• Government Bureaucracy

QATAR• GCC Diplomatic Issues• New Visa Waiver for 80 Countries (2017)• New Transit Visas • Rampant Development

Source: HotStats, August 2017 – July 2018

REGIONAL HOTEL PERFORMANCEREVPAR & GOPPAR

BEIRUTRevPAR: -47.4%GOPPAR: -43.8%

AMMANRevPAR: -4.3%

GOPPAR: -18.2%

JEDDAHRevPAR: -1.6%GOPPAR: 4.0%

RIYADHRevPAR: 4.0%

GOPPAR: 25.6%ABU DHABI

RevPAR: -1.0%GOPPAR: 2.0%

MUSCATRevPAR: -19.6%GOPPAR: -34.2%

DUBAIRevPAR: -4.8%GOPPAR: -8.7%

DOHARevPAR: -15.1%GOPPAR: -16.2%

MANAMARevPAR: -15.9%GOPPAR: -26.1%

KUWAITRevPAR: 5.6%GOPPAR: 3.4%

2.41million visitors

71%Occupancy

342ARR

214,600

6.9%

2.6Days (ALOS)

31,236Rooms of Supply

2.1%

196,600

135,200

94,700

71,300

5.1%

29,300 (15.8%)

31,400 (19.0%)

19,400 (25.8%)

13,500 (12.7%)

11,400 (17.4%)

2.0%

2.6%

UAE TOURISM OVERVIEWABU DHABI (YTD June 2018)

Top Source MarketsHighest Increase in

Arrivals Volume

7.0%

743,000

599,000

453,000

40,000 (9.6%)

32,000 (12.0%)

29,000 (18.0%)

UAE TOURISM OVERVIEWDUBAI (YTD June 2018)

8.1million visitors

77%Occupancy

501ARR

4.7%

3.6Days (ALOS)

111,317Rooms of Supply

0.5%

2. 0%

0.0%

Top Source MarketsHighest Increase in

Arrivals Volume

1,082,000

405,000

172,000 (74.0%)

31,000 (2.9%)

• HotStats is a hotel profit and lossbenchmarking tool, which allowsfor direct comparison with yourcompetition;

• Launched in the UK in 1997, thetool now covers more than 800,000hotel establishment rooms globally;

• Operations in the MENA regioncommenced in 2011;

• Consists of over 450 hotels acrossthe MENA region and over 1,500properties worldwide;

• Provides in excess of 100performance metric comparisonscovering 70 areas of hotel revenue,cost, profit.

HOTEL PROFITABILITY BENCHMARKINGHOTSTATS

KEY PERFORMANCE INDICATOR ABU DHABI Change (%) DUBAI Change (%)

ROOMS OCCUPANCY (%) 75.2 1.7 79.3 -0.8

AVERAGE ROOM RATE (AED) 476.7 -3.3 827.8 -3.9

ROOMS REVPAR (AED) 358.6 -1.0 656.7 -4.8

FOOD REVPAR (AED) 189.1 -4.0 256.4 -1.8

BEVERAGE REVPAR (AED) 69.0 -11.6 118.3 -5.3

TREVPAR (AED) 673.0 -2.7 1,129.3 -3.9

PAYROLL PERCENTAGE (%) 30.5 -0.9 25.3 1.1

GOPPAR (AED) 200.1 2.0 435.6 -8.7

GOP PERCENTAGE 29.7 1.3 38.6 -2.0

KEY PERFORMANCE INDICATORSABU DHABI & DUBAI


450.0

475.0

500.0

525.0

550.0

575.0

600.0

Au

g-1

5

Sep

-15

Oct

-15

No

v-1

5

De

c-1

5

Jan

-16

Feb

-16

Mar

-16

Ap

r-1

6

May

-16

Jun

-16

Jul-

16

Au

g-1

6

Sep

-16

Oct

-16

No

v-1

6

De

c-1

6

Jan

-17

Feb

-17

Mar

-17

Ap

r-1

7

May

-17

Jun

-17

Jul-

17

Au

g-1

7

Sep

-17

Oct

-17

No

v-1

7

De

c-1

7

Jan

-18

Feb

-18

Mar

-18

Ap

r-1

8

May

-18

Jun

-18

Jul-

18

ADR 36-MONTH TREND GRAPHABU DHABI


ADR 36-MONTH TREND GRAPHDUBAI


800.0

825.0

850.0

875.0

900.0

925.0

950.0

975.0

1000.0

1025.0

1050.0

Au

g-1

5

Sep

-15

Oct

-15

No

v-1

5

De

c-1

5

Jan

-16

Feb

-16

Mar

-16

Ap

r-1

6

May

-16

Jun

-16

Jul-

16

Au

g-1

6

Sep

-16

Oct

-16

No

v-1

6

De

c-1

6

Jan

-17

Feb

-17

Mar

-17

Ap

r-1

7

May

-17

Jun

-17

Jul-

17

Au

g-1

7

Sep

-17

Oct

-17

No

v-1

7

De

c-1

7

Jan

-18

Feb

-18

Mar

-18

Ap

r-1

8

May

-18

Jun

-18

Jul-

18

21.5 27.1 6.0 21.0 12.0 12.5

2.4 2.5

1.0

-4.3

0.9

-2.4

-6.0

-5.0

-4.0

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

0.0

5.0

10.0

15.0

20.0

25.0

30.0

BestAvailable

Rate(B.A.R.)

Corporate Conference Leisure Tours &Groups

Other

Market Segmentation (%)

494.2 476.0 519.7 464.3 411.0 511.9

-4.4 -4.6

-9.1

-6.3

3.5 3.9

-12.0

-10.0

-8.0

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

0.0

100.0

200.0

300.0

400.0

500.0

600.0

BestAvailable

Rate(B.A.R.)


Other

Average Rate / Segment (AED)

MARKET SEGMENTATIONABU DHABI


873.3 613.7 691.5 1009.6 602.9 825.3

-14.3

-6.4-5.0

-0.4

1.9

4.5

-20.0

-15.0

-10.0

-5.0

0.0

5.0

10.0

0.0

200.0

400.0

600.0

800.0

1000.0

1200.0

BestAvailable

Rate(B.A.R.)


Other

Average Rate / Segment (AED)

20.1 18.2 4.8 35.3 12.2 9.4

2.2

0.30.0

-1.5

-0.3-0.7

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

BestAvailable

Rate(B.A.R.)


Other

Market Segmentation (%)

MARKET SEGMENTATIONDUBAI


4.2% 3.6% 2.9%

6.4%

30.5% 29.7%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

Admin &General

Sales &Marketing

POMEC Utility Costs Total HotelPayroll

GrossOperating

Profit

Undistributed Expenses

76.2%

36.9%

56.0% 58.6%

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

Rooms Food &Beverage

MOD & Others DepartmentalProfits

Departmental Profits

Rooms, 53.3%

Food, 28.1%

Beverage, 10.2%

MOD & Others,

8.4%

Revenue Mix (Aug 2017 – July 2018)

PROFIT AND LOSSABU DHABI


• Rooms department generated onaverage 53.3% of total revenues,followed by Food and Beverage with38.3%;

• Revenue share claimed by the Roomsand MOD & Others departmentsincreased year-on-year, while shareclaimed by the Food and Beveragedepartment declined marginally;

• Overall departmental profits grew1.7% to 58.6% with MOD & Othersregistering highest year-on-yeargrowth of 9.4%;

• Rooms department profits increasedby 1.6% to 76.2%;

• Food and Beverage profits alsoincreased by 0.7% to 36.9%.

3.2% 3.2% 2.0%

6.9%

25.3%

38.6%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

Admin &General

Sales &Marketing

POMEC Utility Costs Total HotelPayroll

Gross OperatingProfit

Undistributed Expenses

78.0%

39.4%

60.4% 63.0%

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

Rooms Food &Beverage

MOD & Others DepartmentalProfits

Departmental Profits

Rooms, 58.2%

Food, 22.7%

Beverage, 10.5%

MOD & Others,

8.6%

Revenue Mix (Aug 2017 – July 2018)

PROFIT AND LOSSDUBAI


• Rooms department generated onaverage 58.2% of total revenues,followed by Food and Beverage with33.2%;

• Revenue share claimed by the Rooms,Beverage and MOD & Othersdepartments declined year-on-year,while share claimed by the Fooddepartment increased by 0.5%;

• Overall departmental profits dropped1.1% to 63.0% with MOD & Othersregistering highest year-on-yeardecline of 3.0%;

• Rooms department profits droppedby 0.6% to 78.0%;

• Food and Beverage profits alsodecreased by 1.2% to 39.4%.

21,997

26,001

28,37429,760

30,602 30,574

33,61934,986

36,39137,525

38,786162

0

20

40

60

80

100

120

140

160

180

200

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Room Supply Hotel Establishments

80,41484,443

92,33398,333

102,845 107,431

126,195

145,378

165,574174,307

180,662

681

-50

50

150

250

350

450

550

650

750

850

950

5,000

25,000

45,000

65,000

85,000

105,000

125,000

145,000

165,000

185,000

205,000

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Room Supply Hotel Establishments

DUBAIABU DHABI

Room Supply 2012-22 CAGR: 8.4% Room Supply 2012-22 CAGR: 5.8%

MARKET OUTLOOKFUTURE SUPPLY

Source: TCA Abu Dhabi, Visit Dubai, DTCM, STR AM:PM

Source: STR AM:PM

ABU DHABI CITY EXISTING SUPPLYMARKET OUTLOOK

24 hotels6,984 rooms

ABU DHABI CITY FUTURE SUPPLYMARKET OUTLOOK

Luxury, 18.2%

Upper-Upscale,

34.9%

Upscale, 18.5%

Upper-Midscale,

15.6%

Midscale, 12.2%

Economy, 0.6%

Current Room Supply Breakdown by Category

Luxury, 21.1%

Upper-Upscale,

36.3%

Upscale, 17.8%

Upper-Midscale,

13.8%

Midscale, 10.5%

Economy, 0.5%

2022 Room Supply Breakdown by Category

-

3,000

6,000

9,000

12,000

15,000

Luxury Upper-Upscale Upscale Upper-Midscale Midscale Economy

Evolution of Room Supply by Category

Current end-2022

MARKET OUTLOOKABU DHABI – FUTURE SUPPLY BREAKDOWN

Source: STR AM:PM

• Abu Dhabi’s hotel room inventory willincrease by an estimated 24.1% by theend of 2022;

• Approximately 90.3% of future supplywill fall into the upscale-to-luxury classbracket;

• The highest growth in room inventorywill be witnessed across the luxurysegment (44.1%), followed by upper-upscale (28.9%) and upscale (19.7%);

• Supply of upper-midscale and midscalehotel rooms will grow 9.8% and 6.6%respectively, while no future supply ofeconomy hotel keys has beenannounced;

• Overall market share claimed byeconomy-to-upper-midscale hotelrooms will decrease on the back ofincreasing market share of upscale-to-luxury inventory.

Source: STR AM:PM

DUBAI EXISTING SUPPLYMARKET OUTLOOK

DUBAI FUTURE SUPPLY

263 hotels75,679 rooms

MARKET OUTLOOK

-

10,000

20,000

30,000

40,000

50,000

60,000

Luxury Upper-Upscale Upscale Upper-Midscale Midscale Economy

Evolution of Room Supply by Category

Current end-2022

Luxury, 20.1%

Upper-Upscale,

29.4%

Upscale, 24.0%

Upper-Midscale,

14.1%

Midscale, 9.1%

Economy, 3.3%

2022 Room Supply Breakdown by Category

Luxury, 19.6%

Upper-Upscale,

25.1%Upscale,

22.7%

Upper-Midscale,

15.6%

Midscale, 11.7%

Economy, 5.3%

Current Room Supply Breakdown by Category

MARKET OUTLOOKDUBAI – FUTURE SUPPLY BREAKDOWN

Source: STR AM:PM

• Dubai’s hotel room inventory will increase by an estimated 70.5% by the end of 2022;

• Approximately 81.7% of future supply will fall into the upscale-to-luxury class bracket;

• The highest growth in room inventory will be witnessed across the upper-upscale segment (102.6%), followed by upscale (82.5%) and luxury (77.7%);

• Supply of upper-midscale, midscale and economy hotel rooms will grow 57.0%, 34.4% and 9.2% respectively;

• Overall market share claimed by economy-to-upper-midscale hotel rooms will decrease on the back of increasing market share of upscale-to-luxury inventory.

MARKET OUTLOOKSUPPLY AND DEMAND FORECAST

Source: TRI, TCA Abu Dhabi, Visit Dubai, DTCM, STR AM:PM

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

2015 2016 2017 2018 2019 2020 2021 2022

Abu Dhabi

Room Supply Room Nights Occupancy

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

200,000

2015 2016 2017 2018 2019 2020 2021 2022

Dubai

Room Supply Room Nights Occupancy

• The estimated 10% growth in room supply in 2018 is likely to put some pressure on occupancy levels in the short term.

• The increased pressure will be more specifically in the five-star segment where the majority of the upcoming supply is positioned.

• Increasing room demand from Abu Dhabi’s top overseas source markets, facilitated by the opening of AUH’s new Midfield Terminal in 2019, and slowdown in future supply are likely to push up occupancy rates after 2019.

• ADR to continue to soften by 6 to 7% through 2018.

• Lower projected occupancy rates and ADR to put downward pressure on RevPAR in full-year 2018.

• Rising corporate demand on the back of rising oil prices and sustained growth in non-oil economic sectors.

• Forecast growth in leisure visitors due to the development of a number of leisure attractions and beachfront resorts, particularly on Saadiyat Island and Yas Island.

MARKET OUTLOOKABU DHABI

• Supply growth is forecast to outpace room demand growth in the run-up to the Expo in 2020

• This will result in a drop in occupancy rates, before reaching a period of stabilisation from 2020 onwards;

• Approximately 75,700 hotel establishment rooms are set to enter Dubai’s market by 2022, reflecting a 70.5% increase in room inventory;

• With about 82% of all future supply falling into the upscale-to-luxury class, the five and four star hotel segments are expected to witness greater competition;

• The sheer volume of new inventory is also anticipated to further reduce ADR and RevPAR indicators in 2018 and 2019 despite the projected increase in demand;

• Expansion of the midscale and economy segments (18.3% of future supply) will continue as the city diversifies its source markets and targets more price-sensitive visitors;

• Upcoming world class leisure attractions and introduction of transit visas and visas-on-arrival for Chinese and Russian travellers will help drive visitor growth.

MARKET OUTLOOKDUBAI

Christopher HewettDirectorMob: +971 50 345 [email protected]

TRI CONSULTINGP.O. BOX 31933Dubai, United Arab EmiratesTel: +971 4 345 4241Fax: +971 4 345 [email protected]

KEY CONTACTS

Documents

HOTELIER MIDDLE EAST - TRI Consulting Consulting... · • Hotel Rebranding HOTEL MANAGEMENT CONTRACTS TRI provides development input for all phases of the development cycle but is