HVS Dubai is pleased to release its first issue of the Hotel Valuation Index (HVI) for select markets in the Middle East
(ME). The HVS Hotel Valuation Index has established itself as a leading publication in the US, Europe, Africa and Asia for
over a decade and we are thrilled to share the regional HVI which provides further insight on regional values and
It is amidst a turbulent economic outlook and political instability that the region continues to diversify its economic
reliance on oil production and to commit large investments on tourism and non-oil related sectors. 2013 international
arrivals into the region were circa 46 million and increased by approximately 35% to 62 million in 2018. Accommodated
room nights grew by 40% in 2018 when compared to 2013, yet the overall hospitality outlook remains cautious and the
declining performance of hotels calls for immediate corrective measures in order to sustain and grow hotel values.
The Middle East region continues to face distraught on the back of ongoing political conflicts and a fragile energy
sector. The region has undergone a range of socio-political and economic shifts that have undoubtedly continued to
impose ramifications pertaining to the ME hotel industry. Atop the macroeconomic and socio-political landscape, HVS
data suggests that the Middle East Hotel market performed at an average occupancy of 68% and an average rate of
USD188 for the period 2013-2018, while Revenue Per Available Room (RevPAR) dropped by 21% when compared to the
While the region’s key performance indicators reflect a slowdown and a correction in the respective markets, hotel
supply in the region continued to grow registering a 42% increase in 2018 when compared to 2013. It is also estimated
that the total number of rooms will grow by 59% by 2022.
Declining RevPAR’s coupled with increasing operating costs resulted in 13 percentage points decrease in Hotel Net
Operating Income across the region, from 40% in 2013 to 27% in 2018. Consequently, the changes in operating
performance impacted the Hotel values which experienced significant drops of 20% and 27% in 2016 and 2017,
recording an all time-low in 2018, with a regional average value per key of USD208,000 (four-star and five-star).
A limited number of hotel transactions took place in the region in the last five years, with most transacted hotels being
well established hotels in Dubai. Although there continues to be keen investors looking for suitable hotel acquisition
opportunities, owners’ expectations and the asking price remains far above the actual value of the hotels based on the
potential income and the future market dynamics.
Who is responsible for the value decline? Are developers making investments that are aligned with market dynamics
and conditions? Are consultants recommending the right development schemes and highlighting the financial risks? Are
operators aligning their brands with the market dynamics and conditions? Are tourism authorities doing enough to
create demand, support developers/investors and govern the imbalances in supply and demand? Is the region attractive
enough for future investments and development?
There is no simple answer to the above critical and valid questions and there is no doubt that the region will continue to
grow its hospitality offering and attract larger share of the international tourism arrivals… BUT it is time for Investors to
stop Overspending, Hotel operators to streamline their operations and create value, Consultants to flag the serious
financial risks and potential rewards, and Tourism authorities and related government entities to support a balanced
It is Time to Rethink how we build and operate hotels… It is Time to Pause and Reflect … It is Time to scrutinize the
traditional hotel model and operations and understand the real income potential which underlines Hotel Valuations.