Ghazi Al-Nufaissi, head of Kuwait's Association of Hotel Owners, says investments in the hotels sector in Kuwait are regaining momentum after almost two decades of stagnation, reports Antoine Dagher
Al-Nufaissi presented the development of the hotel sector in Kuwait in a special session on tourism co-operation between Lebanon and Kuwait during the Lebanese-Kuwaiti Economic Forum that was organised by Al-Iktissad Wal-Aamal Group in Beirut last December.
He indicated that sector was first launched in the 1950s, with the contribution of Lebanese investors who transformed some existing buildings in Kuwait City into hotels.
"In mid 1960s, the Sheraton and Hilton 5-star hotels were opened," he said. "But the investment activities came to a halt until early 1980s when a wave of new properties were established."
Such activities have, however, stopped again during the 1980s and 1990s because of the successive political and economic crises in the Gulf region during the Iran-Iraq war, the Iraqi invasion of Kuwait and the famous "Souk Al-Manakh" crisis that shook the Kuwaiti economy.
According to Al-Nufaissi, Kuwait had to suffer from a lack of growth in its economy between 1982 and 2002, despite the efforts towards economic reforms since 1996. He indicated that this explains the absence of new developments of the hotel sector all through that period.
Between 1982 and 2002, the sector's room inventory remained unchanged with a total of nearly 7,800 rooms, including 4,500 hotel rooms in 29 properties, 2,000 hotel apartment suites, and 1,300 rooms in resorts. Worst yet, occupancy level during that period remained below the mark of 45 percent in average.
The recoveryBut Al-Nufaissi noted that the beginning of the new millennium represented a turning point for the sector. He explained that by 2002 there were signs of recovery, which was the result of many factors on the regional and international levels. Such factors included the events of September 11, 2001 and the partial repatriation of Kuwaiti capitals abroad. They also included a remarkable growth in intra-regional tourism, due to the non-welcoming treatment of Arab tourists in the traditional destinations in the west.
Al-Nufaissi added that the real recovery in the sector took place during the Iraq war of 2003. Hundreds of journalists, foreign military personnel and business people flocked Kuwait in that period inducing a major leap in hotel occupancy throughout the country.
This trend has been well discussed by international reports, which indicated that in terms of occupancy levels, Kuwait jumped from the 127th to the first rank on the international scale.
A most recent survey by Deloitte's Hotel Benchmark confirmed this reality. It stated, "Kuwait's hotels have benefited from war related demand which has helped push up average room rates. Over recent years occupancy has moved from 50 percent in 2000 to reach a peak of 85 percent last year (2003). Unsurprisingly due to the displacement of demand, year-to-October 2004 results show occupancy levels falling 16.6 percent compared to the same period in 2003. While the city was able to achieve a 4.6 percent increase in average room rates, it has lost its position as the most expensive city tracked by the survey, a standing Kuwait held for four years."
Al-Nufaissi said that occupancy levels represented only one indicator of the recovery. He explained that average occupancy in Kuwait's hotels suddenly increased to 70 percent in 2002, and to an unprecedented high of nearly 90 percent throughout 2003. He added that in 2004, hotel occupancy returned gradually to its normal levels.
Another indicator of recovery in Kuwait's hotel sector, according to Al-Nufaissi is the growing interest in investing in the sector. "Until last June, there were 90 applications for new hotel properties in Kuwait," he said. This is expected to quadruple the number of existing hotel rooms in the country with an estimated total inventory of 20,000 hotel rooms in the coming few years.
"Kuwait will have more rooms than Lebanon, and almost 4,000 rooms less than Dubai," he said.
Al-Nufaissi noted that the third indicator of recovery is the growing number newly established and announced giant projects, which will boast additional hotels and resorts.
For example, the Failaka Island Development Project, one of such tourism projects, would add another 4,000 rooms and chalets to the sector in "the most beautiful island off the coast of Kuwait," he said.
According to government sources, nine consortia of 120 companies have already shown interest in the project on that island, which lies 20 kilometres east of Kuwait City.
The construction of project is expected to start in the fall of 2005 and will take almost 10 years to complete. The project will consist of a holiday resort over an area of 26 sq. kilometres. It will boast hotels, chalets and entertainment facilities, which will be operated on the basis of 30-year build-operate-transfer (BOT) agreements.
Dealing with concernsAl-Nufaissi however admitted that his association had serious concerns about the impacts of this new wave of developments on the existing businesses. "But this wave coincided with the new trends in both the public and private sectors which aim at more openness," he said
He explained that those trends had promising prospects of growth in the market to keep all the sector busy and able to absorb the growing demand in the very near future.
He added that a number of measures have resulted from those trends to boost the flow of tourists to the country. Such measures include facilitating entry to the citizens of 34 nations, allowing them to obtain visas immediately in the airport.
Other measures included the development of new investment laws and regulations, and tax laws for foreign businesses in a bid to make Kuwait a regional financial and trade centre.
The government of Kuwait has also been working on developing a 20-year strategic tourism development plan. "This gives us hope to attract a large slice of the outbound Gulf tourism for family vacations, along with a part of Arab business tourism and representatives of international companies," said Al-Nufaissi.
The Lebanese dimension
Al-Nufaissi indicated that the latest developments in the Kuwaiti tourism and hotels sector would bring a lot of opportunities particularly to the Lebanese, who have actively contributed to the development of the sector since its early beginning in 1950s.
"The future in Kuwait will be opened to Lebanese capitals who are specialized in the hospitality industry," he said, "especially if the tourism strategic plan was implemented by the government.
"Consequently, the prospects of cooperation in human investments will be great, especially that almost 20 percent of the human resources in operating hotels and restaurants are Lebanese."
He expected that the upcoming expansion of the sector in the country would create thousands of new job opportunities for Lebanese workers in Kuwait, if their share in the job market remains unchanged. But he added that the percentage of Lebanese human resources is due to increase in the future, particularly if the sector commits to well-determined standards of service.
"This developing market for our Lebanese brothers requires from us all in this domain to prepare ourselves to reach this reality according to the best conditions, and in the best interest of all," he said.
Al-Nufaissi suggested four venues of cooperation in this regard including:
1- Developing the framework of cooperation in the field of education and training
2- Developing the appropriate legislation for the hotel sector, where Kuwait can benefit from the Lebanese experience in this regard
3- Organizing specialized conferences and workshops for hospitality and hotel professionals from both countries
4- Investigating the feasibility of the participation of Lebanese professionals in establishing a hotel school in Kuwait, to help Kuwaiti youth and Lebanese students residing in Kuwait to get started in this field. Another option would be to facilitate the enrolment of this group of young students in Lebanese educational institutions and to help them get their training in Lebanese establishments.
5- To boost coordination between the hotels sectors in both Kuwait and Lebanon in international and regional conferences, exhibitions and associations.
"The distinct relationship between both countries has matured since many years. This will certainly help our efforts to find new venues of cooperation on all levels, particularly in the what concerns the tourism and hotels sectors," Al-Nufaissi concluded.
© Middle East Travel 2005
