In this edition of the Global Serviced Apartment Industry report we have invited
industry experts in every region to provide an overview of their local market. Martin
Kubler of Iconsulthotels FZE gives his analysis of the Middle East serviced apartments
The year 2011, to date, certainly developed differently for the region’s serviced
apartments operators from what most industry professionals expected when 2010 drew
to a close.
In the aftermath of the global financial crisis, which also affected many countries
in the Middle East, serviced apartment operators had just started to look ahead
to improvements in occupancy levels and, to a lesser extent, ADR, when the Arab
Spring of 2011 suddenly changed the game plan completely.
Unfolding at a dramatic pace, the events in Egypt did not influence the serviced
apartments industry in the Middle East too much, but mainly impacted hotel operators
instead, as tour groups and tourists cancelled their Middle East itineraries often
at very short notice. Apartment operators in locations perceived as “safe havens”,
such as Dubai and Abu Dhabi, even managed to pick up business from clients temporarily
relocating out of Egypt and, later on, Bahrain.
As developments dragged on and started to affect other countries in the region,
such as Syria and Yemen, some of these “temporary” arrangements seemed to become
a little more permanent with international companies relocating entire offices from
troubled regions to safer locations, particularly the United Arab Emirates and,
to a lesser degree, Qatar.
In the United Arab Emirates, particularly in the two main business hubs of Dubai
and Abu Dhabi, occupancy rates increased considerably due to an influx of guests
from neighbouring countries, yet apartment rates remained very low which was mainly
due to supply exceeding demand and a steep decline in residential property rents.
At the beginning of 2009, the Department of Tourism & Commerce Marketing (DTCM)
in Dubai registered 165 serviced apartments properties offering 14,969 units. In
June 2011, the DTCM statistics showed 189 properties with a total of 20,883 units.
Exact figures for the neighbouring Emirate of Abu Dhabi are not available, but data
presented in SCAD’s Statistical Yearbook - 2010 shows that the number of Abu Dhabi
hotel establishments (of which serviced apartments are an increasingly important
part) increased by 5.5% to 115 establishments in 2010. This was accompanied by a
growth of 10.2% in the number of hotel rooms.
At the same time, residential rental prices dropped sharply in both Dubai and Abu
Dhabi – a trend which is still on-going. In Abu Dhabi, for example, rents declined
by 10% in Q4 2010, while many parts of Dubai recorded declines of more than 20%.
While the global financial crisis saw the influx of international corporate clients
slow down, many existing residents in the region used the decline in rental prices
to trade up and moved from residential apartments and villas into serviced apartments.
This also meant that not only the demand for different unit types, but also the
guest mix in many properties changed. While in previous years, studios and one-bedroom
units were in high demand, mostly by corporate executives on limited-term assignments,
larger units now became more desirable as regionally-based clients and their families
increasingly viewed serviced apartments as a viable long-term residential option.
Unfortunately, reliable statistics on guest segmentation in the region’s serviced
apartments properties are impossible to come by, but anecdotal evidence suggests
that regionally-based, longterm clients now make up a good part of residents in
The market in most parts of the region is still very much controlled by smaller,
independent operators, reflecting the history of serviced apartments in the Middle
East, which were originally often chosen by Arab travellers who valued the extra
space and privacy apartments afford over traditional hotel rooms.
Also the fact that, in the United Arab Emirates, serviced apartments properties
are rarely able to obtain a license to serve alcoholic drinks (with very few exceptions,
the licensing authorities will only allow properties classified as “hotels” to serve
alcohol and there are hardly any stand-alone restaurants or bars), matters less
to the mainly Muslim Arab guests.
During the last two to three years, larger regional and international operators,
did increasingly enter the market and introduce a variety of extended-stay and serviced
apartments products ranging from Accor’s SuiteNovotel (Dubai) to IHG’s Staybridge
Suites (Abu Dhabi) & Intercontinental Residence Suites (Dubai), Marriott’s Executive
Apartments (Dubai, Doha, Manama), and Rotana’s Arjaan Hotel Apartments. The latter
is growing particularly fast and currently covers the United Arab Emirates (six
properties), Kuwait, Saudi Arabia, Qatar, and Syria (two properties).
Rotana is also the only internationally branded operator with properties in emerging
business destinations like Erbil (Kurdistan) and Khartoum (Sudan). Mövenpick Hotels
also entered the serviced apartments market recently with mixed use developments
such as the Laguna Tower in Dubai. Outside the United Arab Emirates, EWA Hotel Apartments
has a strong base in Saudi Arabia (four properties) and ambitious expansion plans
which include Bahrain, Sudan, and Oman.
The United Arab Emirates still lead the regional development pipeline, with brands
like Rosewood, Fairmont, and St. Regis scheduled to add more than 1,800 serviced
apartments units to the existing inventory over the next two years. Qatar will also
see a considerable inventory increase over the next two years including the opening
of the Hilton Doha Residence and the Le Meridien Doha, which is projected to feature
100 serviced apartments in addition to hotel rooms.
Saudi Arabia, long seen as mostly a religious destination, is consistently increasing
its profile as a regional business destination and operators like Kempinski, Hyatt
(Summerfield Suites), and Golden Tulip are planning to open serviced apartments
/ extended-stay properties in the country over the next two years.
The global financial crisis saw serviced apartments in many Middle East destinations
increasingly being seen as a viable alternative to hotel by travellers with families,
who often prefer to use the kitchen facilities to eating out in restaurants in order
to stretch their holiday budgets further.