Middle East hotel industry strength likely to be challenged by economic issues in other world regions

Different from other world regions, the Middle East is operating from a position of economic strength with 2023 approaching. That bodes well for the hospitality industry, but a looming recession in key source markets will likely create challenges given the Middle East’s historic reliance on international inbound travel.

When looking ahead at the next year, the United Arab Emirates and Saudi Arabia are forecasted to maintain GDP growth while the U.S., U.K. and Eurozone are headed for recession, according to Oxford Economics. That is largely due to the Middle East’s status as an oil producer.

Unlike those other regions, however, the Middle East is not a market that typically sees a ton of hotel demand from domestic sources.

Further, there is likely to be more incentive for well-off Middle East residents to travel abroad given the weakness of the Euro and the Pound Sterling. On the other side of the exchange rate, it is going to be tougher for the Middle East to attract Brits for their getaways.

While exchange rates favor outbound rather than inbound travel, the Middle East does have another “mega event” on the horizon as well as a history of overcoming challenges.

As shown in STR’s Forward STAR data, occupancy on the books and pickup have climbed steadily for the World Cup period. We’ll dive deeper into demand for the World Cup in future analysis, as the impact should expand beyond the host country and into the region’s other destinations.

That will be welcome news as occupancy remains slightly below pre-pandemic levels for most Middle East countries.

The World Cup has been a driver of development in Qatar, but growth has been common around the region with a focus on diversifying from oil toward tourism. Saudi Arabia alone has more than 80,000 rooms in development, nearly half of which is in construction.

UAE supply growth isn’t as robust as past years because all the rooms added prior to and during EXPO make it mathematically harder to report higher percentage changes. However, the country’s pipeline alone is still almost 50,000 rooms, which is as much existing supply as some decent sized nations.