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Significant growth anticipated in the rapidly recovering GCC hospitality sector

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GCC hospitality industry to experience significant growth amid a rapid pandemic recovery, Alpen Capital reports.

Anticipated to reach pre-pandemic levels within 2022, the GCC hospitality industry is set to boom, growing by 74.8% year-on-year and amassing revenues of 26.3 billion dollars. That is according to the recent GCC Hospitality Industry report from Alpen Capital.

The report continues to state how until 2026, the GCC hospitality industry is expected to undergo a compound annual growth rate (CAGR) of 6.6%. The contributors to this growth along with the challenges and trends conveyed can be seen below.

 

KEY CONTRIBUTORS TO GROWTH IN THE GCC’S HOSPITALITY SECTOR:

 

Easing Pandemic Restrictions

A key contributing factor to this growth is the easing of pandemic induced restrictions. The removal of which has led to the reopening of international borders and the easing of travel restrictions.

But also, increases in per capita income are set to improve the domestic consumer demand. Thereby, accelerating growth within the tourism sector and in turn the GCC’s hospitality sector.

Heavy Spending on Tourism Infrastructure and Tourism Incentives

Regional governments are diversifying their revenues away from oil dependency. They are doing so by investing in tourism-related infrastructure. So, this promotes leisure destinations and the hospitality sector as a result.

So, there has not only been a noteworthy rise in the number of hotels, serviced apartments, and alternative accommodation to meet the regions expanding demand as a tourist destination.

But also, continued growth in tourism inflows is causing a rise in average occupancy rates within the GCC’s hospitality sector. This average occupancy rate is anticipated to increase from 57% in 2022 to 62% in 2026.

Also, the UAE, Saudi Arabia, and Qatar have introduced measures to encourage tourism. These include introducing new visa categories and expanding the reach of beneficiaries. So, growth in the GCC’s hospitality sector is clear. This is given the need to accommodate for the rising inflows of people that large scale investments within the GCC’s tourism sector will enable.

Other Key Growth Factors in the GCC’s Hospitality Sector

Alpen Capital covey three other factors as contributors to growth in the GCC’s Hospitality Sector. Transforming the GCC into a global hub for business, entertainment, and sports events is one factor. Examples of which include the 2022 FIFA World Cup in Qatar, the Formula 1 Grand Prix, and the recently held EXPO 2020 Dubai.

Religious tourism, and the upgrading of transport infrastructure are the other core factors impacting growth in the GCC’s hospitality sector.

 

KEY CHALLENGES WITHIN THE GCC’S HOSPITALITY INDUSTRY

Despite the positive outlook ahead for the GCC’s hospitality industry, Alpen Capital convey how the industry is under strain. This is a due to lower revenues via significant corrections in oil prices, as well as Covid-19 related travel restrictions and firm closures.

Equally, the present inflationary environment is likely to reduce consumer spending power. So, the ability for people within the GCC region to consume hospitality services will take a hit.

Lastly, the fragmentation and fierce competition within the GCC’s hospitality industry has put pressure on operating costs and margins.

 

KEY TRENDS WITHIN THE GCC’S HOSPITALITY INDUSTRY

Increased diversification is occurring in the GCC's hospitality industry. The rise of niche brands, serviced apartments, and the Airbnb model are key here. Hotel companies are using this to maximise revenues and operational efficiencies.

Finally, digitalization an increasingly important factor in the hospitality sector of the GCC. Businesses are using digitalization to not only simplify processes and reduce workloads. But also, to cut costs, boost customer satisfaction, and expand revenue generation opportunities.

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