MENA hotels expect recovery from Q4 of 2020: Colliers

Pandemic’s impact in Egypt has been felt across markets with a higher dependence on the leisure segment

Image used for illustrative purpose. A nice yellow hotel room with one bed.

Image used for illustrative purpose. A nice yellow hotel room with one bed.

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Most hotel investors in the Middle East and North Africa (MENA) region remain hopeful for a relatively quick recovery period from the coronavirus (COVID-19) pandemic. A total of 46% of respondents surveyed by Colliers International expect the recovery period to begin in the fourth quarter (Q4) of 2020.

Colliers’ MENA Hotels Quarterly Review report, released in 7 May, indicated that 79% of hotel owners have decided to partially or fully close their hotels due to low occupancy rates.

The report cites that the coronavirus pandemic has had a drastic impact on the hospitality industry globally and in Egypt. Despite this, the hospitality industry continues to support medical efforts by providing facilities as quarantine areas.

In the case of Egypt, the pandemic’s impact has been felt across markets with a higher dependence on the leisure segment. In Q1 2020, an average drop of 24% in occupancy was witnessed across the Alexandria, Sharm El-Sheikh and Hurghada hotel markets.

An additional 6,000 keys (hotel rooms) are expected to open in the Egyptian market by the full year 2022, of which Hurghada and Sharm El-Sheikh account for 62%. The forthcoming supply might experience delays due to the impact of the coronavirus on projects under construction.

The overall picture in Gulf Cooperation Council (GCC) countries seems bleak, as they have suspended all international flights and tourist visas. Some GCC hotels have been closed temporarily, while some are acting as isolation centres. Religious tourism in Saudi Arabia has also been temporarily suspended.

According to the report, the coronavirus pandemic has had a significant impact on Saudi Arabia’s hotel industry, which has experienced a drop in occupancy with Makkah being the hardest hit market. This is due to the Saudi government’s temporarily halting religious activities, which draw millions of people to the city every year.

Makkah reported a 23% drop in occupancy compared to the same period in 2019, with Riyadh the only market that experienced an improvement in occupancy levels for the first quarter.

Saudi Arabia’s supply is expected to grow at a compound annual growth rate (CAGR) of 16% from 2020 to 2022. However, the ongoing coronavirus pandemic is expected to influence construction timelines.

Moving on to the UAE, the report indicates that in Q1 2020, overall performance has declined. Many of the emirates have indicated double-digit decreases in both average daily rates and occupancy levels.

Colliers forecasts that the market supply is expected to increase at a CAGR of 12% between 2020 and 2022. This will introduce an additional 35,200 keys in the market.

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