GCC Hotel Supply Set to Hit 616,000 Rooms by 2030

SPEAKER_1 (0:00)

It's the Morning Drive. The GCC is set for a major expansion in hotel supply. Nearly 126,000 new rooms expected by 2030 It's not far away either, but occupancy has obviously fallen across the region this year. Demand is adjusting to regional conditions. It's Future Hospitality Summit. There is a new report out. We have Zacky Sajjad, who is the Director of Business Development and Client Relations at Cavendish Maxwell, to look at what's happening across the GCC.

That's good to see you.

Zacky Sajjad (0:33)

Good morning. Thanks for having me.

SPEAKER_1 (0:34)

You're very welcome back with us. It's been a while since we've seen you, Zacky. So, nearly 126,000 new hotel rooms expected by 2030 That's a level of expansion. What's driving it?

Zacky Sajjad (0:48)

I'd say sort of three things mainly. Economic diversification, tourism targets, and infrastructure investment.

They're the three main drivers. I think we look at what's happening regionally, not just sort of the UAE exclusively. Everyone's trying to diversify their economies, away from the sort of oil-dependent economies. And tourism is one of those sectors that they're really focused on.

SPEAKER_1 (1:15)

Saudi Arabia, almost 100,000, 94,500 rooms in the pipeline. The UAE more than 23,000. I guess there's a message there. What does it tell us about where hospitality investment is heading?

Zacky Sajjad (1:30)

I would say, if you look at it, Saudi Arabia is probably the growth market today, whereas the UAE is sort of the kind of mature market, if you like.

Although Saudi Arabia has always had the kind of religious tourism, and that's been a big part of one of the big drivers for them, from a tourist perspective. The UAE sort of started ahead of Saudi, if you like, in terms of trying to diversify and real focus on the hospitality and the tourism industry. And the hotel supply that we have, obviously, we're looking at sort of 150,000 hotel rooms already in the UAE today.

SPEAKER_1 (2:14)

Is that the UAE or Dubai?

Zacky Sajjad (2:16)

Oh, sorry, yeah, Dubai. That's just Dubai, 150,000.

SPEAKER_1 (2:19)

Yeah, yeah.

Zacky Sajjad (2:20)

So, you know, when you look at that with the upcoming pipeline of approximately another, depending on where, you know, sort of roughly 20,000 rooms coming, and occupancy rates were, you know, last year over 80%, you know, and depending on which properties you looked at specifically, you could even get higher percentages than that. So, that's essentially why you're seeing that sort of divergence between Saudi and the UAE.

SPEAKER_1 (2:48)

Well, I was going to ask you how much additional supply can the market absorb, but you've just quoted me some rates that kind of make me think that question has been negated.

Zacky Sajjad (2:58)

Yeah, look, I think what's going to happen, I mean, look, the region has done a very good job of diversifying in terms of mice events, high entertainment, leisure, providing water parks, theme parks, as well as the airlines themselves. If you look at how connected they are, and making the sort of, certainly Dubai and Abu Dhabi, sort of regional hubs, if you like, or travel hubs for people to get from, say, Europe to Australasia, for example, or from Europe to Asia. So these are all sort of drivers that have kind of allowed this to happen.

And then obviously with the hotel supply, it's encouraging people to stay for a part of that journey.

SPEAKER_1 (3:49)

I mean, a lot of the new hotel supply is branded residents or tied to branded residents, I suppose. So do you think developers are relying on apartment sales to fund hotel construction risks in, I suppose it's a cooling market. Is there an element of that, do you think?

Zacky Sajjad (4:05)

Look, I think brand residences have been a sort of quite a success story for a few years now.

SPEAKER_1 (4:09)

Remarkable.

Zacky Sajjad (4:10)

Yeah, and I think we're seeing now not just the sort of typical hospitality brands within that sector, you're seeing fashion and leisure brands entering that sector and lifestyle brands entering that sector. So yeah, look, that is a way of sort of building a hotel. It costs a lot of money, right?

And the returns on that take a little bit longer than perhaps sort of develop a model of residential that you can develop and sell in a shorter time scale. So yeah, there is a bit of diversification on that front, but ultimately, I think the people and the way we're operating is changing dramatically. So the lines are becoming blurred between live, work, play. So I think this is also an element of why you're seeing these kind of hybrid models entering the space.