STR: Downturn for GCC hotels correlates with oil prices

Hotels in the GCC have experienced a downturn in performance and overall profitability that correlates with a decline in oil prices, according to data and analysis from STR.

Through the first half of 2016, the GCC hotel industry reported a 10.3 per cent year-over-year decrease in revenue per available room (RevPAR). According to Statista, the average price of OPEC crude oil in 2016 is down 27.0 per cent (to $36.13) from the average price per barrel in 2015.

STR analysts note that RevPAR and gross operating profit per available room (GOPPAR), the key hotel profitability indicator, have trended similarly to the price of crude oil during the past decade.

According to Statista, the price of OPEC crude oil averaged $96.29 per barrel in 2014 but plummeted 48.6 per cent to an average price of $49.49 in 2015. Over the same time period, corporate business in GCC hotels suffered with year-over-year declines in room revenue (down 3.1 per cent), food & beverage (down 3.8 per cent) and other operated departments (down 5.8 per cent), according to STR’s 2015 Global Profitability Review. Overall, total revenue for GCC hotels was down 3.0 per cent in 2015.

“Since many of the key cities in the Middle East rely heavily on corporate travel for events and conventions, it is not strange to see overall profitability declines partially as a result of the drop in oil price,” said Philip Wooller, STR’s area director for the Middle East and Africa. “When you couple that with strong supply growth in the majority of these markets, the downward trend is amplified. At the market level, however, Dubai still maintains one of the highest GOPPAR levels in the world.”


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