"The COVID-19 pandemic has substantially impacted the Middle East, and Africa Region's hotel sector as airlift, domestic travel and hence hotel demand levels dropped at almost 30-40 percent as of YTD June 2020 year-on-year," said Thuku Kimani, Senior Consultant at Colliers International MENA.
However, on a positive note, he said a better understanding of COVID-19 allowed governments to ease restrictions from the third quarter of 2020 to allow for the opening-up of economic activity, including travel.
In the Arabian Peninsula, CBRE pointed out that capital cities tend to perform slightly better than other markets, especially in occupancy rates. It said some markets like Abu Dhabi, Doha, and Riyadh have managed to maintain relatively healthy performance above 50 percent occupancy in year-to-August data.
"We understand that some of these markets have benefited from quarantine stays and long-term guests that helped boost occupancy rates during the initial months where travel restrictions were put in place," said Bruno Trenchard, Senior Manager - Hotels & Hospitality at CBRE Middle East.
He added that the most affected markets across the Middle East were those relying heavily on leisure tourism and international visitors.
At the country level, in the Middle East, Qatar recorded the highest occupancy level at 57 percent in September 2020, according to STR. The UAE hotel market recorded 48.7 percent occupancy - better than the Middle East's overall occupancy level of 43 percent in September.
"In the UAE, the easing of restrictions and heavily discounted room rates encouraged an uptick of staycations and domestic travel within the country," said Kimani.
At 34.4 percent occupancy level, Saudi Arabia's performance was slightly lower than August when summer staycations and domestic demand following Eid al-Adha provided a small boost, STR said, but the Kingdom continues to command the highest ADR (508.8 Saudi riyals / $135.64) in the region.
"In Saudi Arabia, the Saudi Summer initiative and campaign by the Saudi Tourism Authority successfully induced domestic travel and spend throughout the kingdom, thereby recording year-on-year growth for the period on both indicators," explained Kimani.
While there has been a substantial improvement in hotel performance from pandemic lows, the key performance metrics are still 15-40 percent lower than the last September.
Hotels continue to be forced to offer rooms at 10-20 percent cheaper than last September - an impact of which is being felt on their earnings as well.
In terms of RevPAR, Middle East hotels currently earn way below what they used to make last September during the pre-pandemic time, with Dubai (-51 percent) and Saudi Arabia (-41 percent) being the worst affected.
While the recent pandemic has impacted all regional markets, industry observers say this has not been felt in equal measure.
"At the city level, Bahrain, Kuwait, Muscat, Jeddah, Makkah, Madinah, and Dubai, have faced the most challenging conditions, with RevPAR declines of over 40 percent. By contrast, markets such as Dammam-Khobar, Ras al Khaimah, and Fujairah have been much more resilient," said Ali Manzoor, Partner, and Head of Hospitality & Leisure at Knight Frank Middle East.
He cited strong domestic visitation and limited supply as the two most critical factors behind the trend.
"In Saudi Arabia specifically, Dammam-Khobar has certainly been able to perform due to these two reasons alone, and we are even seeing strong KPIs within secondary cities such as Abha, which may have always had a contingent of domestic visitation but are now able to push the average rate."
Moving forward, Colliers expects the UAE and Saudi markets to see a faster recovery in comparison to the other markets in the region. In its latest MENA Hotel Forecast 2020 released on Monday, Colliers stated that the UAE would potentially benefit from the build-up to the World Expo in Dubai next year.
However, Manzoor noted that market conditions in the region would likely "remain challenging in the short term, with most analysts forecasting a two-year roadmap back to normality."
He said asset owners would have to manage the double impact of decreased visitation and increasing operational costs stemming from COVID-related health and safety measures for the foreseeable future.
"Given that we are starting to see banks offering two-to-three-year interest-only grace periods to provide some relief for distressed owners, it is clear that many in the financial sector share this view," Manzoor concluded.
(Reporting by Syed Ameen Kader; Editing by Anoop Menon)
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