Doha hotels experience stronger demand, however rates and profits continue to fall

Doha Hotels continued to struggle to elevate key performance indicators which remained under pressure during December, despite a 3.1 percentage point rise in occupancy to 63.3 percent. On-going rate reductions resulting from high levels of competition fuelled a 20.8 percent decline in

ARR to US$ 226.99 which in turn, drove RevPAR down 16.8 percent to US$ 143.71. An increase in food, beverage and MICE revenues was insufficient to negate the decline in TRevPAR and GOPPAR by 4.5 percent and 11.6 percent, respectively.

“Considering the extent of new supply that came online in 2013, Doha was able to maintain occupancy levels consistent with 2012 at 64.3 percent, as the city attracted an increasing number of leisure visitors. The fall in RevPAR during 2013 was driven by a 5.4 percent decline in average rates, as four and five star hotels sought to maintain market share through rate competition. A growth in non-room revenues positively impacted TRevPAR levels, however it was not sufficient enough to stop the decline in profitability in 2013” commented Goddard.

Egypt witnessed the lowest hotel performance amongst the five cities surveyed in the region, both in terms of December figures and 2013 year-end results, as the country remained under the grip of civil unrest and political uncertainty. The capital city of Cairo reported mixed results in December, with occupancy reaching 36.8 percent for the month, down by 5.3 percentage points from the previous year. However, ARR levels remained stable despite the turmoil, increasing 7.2 percent to close the month at US$109.42. December saw a rise in demand from leisure visitors which became the highest-yielding segment, with rates increasing 40 percent from the previous year. Although RevPAR suffered a decline of 6.3 percent, TRevPAR saw a minor increase of 0.4 percent and in conjunction with decreased operating costs, boosted profitability by 3.9 percent.

Sharm El Sheikh, on the other hand, recorded a decline in all performance indicators and posted the lowest profit levels in the region, as a market-wide price war reduced rates and impacted profit margins. The combined effects of 7.3 percentage point decline in occupancy coupled with an 8.1 percent drop in average rates drove a double-digit decline in RevPAR by 19.8 percent. Although December was a particularly challenging month for Sharm El Sheikh, performance across the year was comparatively stronger, with ARR increasing 7.2 percent and alleviating the impact of lower occupancies on RevPAR. A decline in non-room revenues coupled with increased payroll costs left profitability 10.7 percent lower in 2013.

“Intensified protests sparked by continued civil and political issues caused performance in Cairo Hotels to deteriorate half way through 2013. The capital was immediately affected by the protests in July that kept hotel performance subdued for the remainder of the year. However, December saw signs of improvement as growth in rates and profits resulted from increased leisure demand. Although performance in Sharm El Sheikh also began to weaken in July, the impact of the political uprisings became evident in September when bookings from tour groups and charters were cancelled as a result of government travel warnings in key source markets. In 2013, hotel performance within the Red Sea destination was more resilient than Cairo due to its distance from the turmoil and the more secure demand provided by pre-booked tour groups” commented Peter Goddard, Managing Director of TRI Hospitality Consulting.