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Budget hotels have ‘seven-star’ potential

Budget hotels have ‘seven-star’ potential

In the pre-recession days of ‘bling’ developments like Dubai’s Burj Al Arab, Mideast hotel owners weren’t interested in developing mid-market properties. But they are now.

May 7, 2010 9:33 by

The CB Richard Ellis report predicts a slow market through this year. “Some markets will improve before this time but as a global perspective recovery will not be seen until 2011,” the report says.

There are opportunities in these markets for all levels of growth, particularly at a time when demand for the luxury segment of the market is low. Regional director for Starwood Hotels and resorts in the Middle East, Guido E. De Wilde, says five-star operators are still having trouble bringing their rates up.

“For the price you get in this market the services are great,” he says. “We are still seeing rate resistance.” He also acknowledged that rate levels are falling off in the upper markets. De Wilde said Sheraton, which is the four-star hotel chain operated by Starwood, had 70 percent occupancy for the first quarter in 2010, which is down from 88 percent in 2009.

In contrast to drops in the luxury sector, Hytonen says the Park Inn outperformed the high end hotels on Yas Island last year, and outperformed his own expectations. “We closed Park Inn at 50 percent at the end of January. I was really very happy, of course, it was not expected.”

In addition to suffering from an oversupply of up-market hotels, this region has encountered the same economic woes as everywhere else. Luxury brands have been hit harder globally because people have less disposable income.

“In Europe the luxury, the top line, is the most hit right now. You have a lot of bankers who right now say they are happy at a Park Inn but they wouldn’t go near it before,” Ritter says.

And some of the largest opportunities lie in tourism from emerging markets.

“If you look at all the emerging markets like India, Brazil and China – that fantastic, big amount of people who travel – they can’t afford to stay in a luxury hotel,” Ritter says. “They can buy an airline ticket but they don’t pay $300 or $400 hundred to sleep.”

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