Middle East hotel investment booms (page 1 of 3)

Trust Prince Walid bin Talal to pick a winner. No one can forget his continued investment in Citigroup in the mid-1980s, which was a major factor in making the prince one of the world's richest men, with a net worth of $20 billion. Now bin Talal seems to have spotted long-term potential in the Mideast hotel sector, once again defying expectations.

Bin Talal recently raised his equity holdings in the Fairmont and Movenpick chains, putting $400 million into projects in Lebanon, Egypt and Dubai. His $140 million Movenpick resort in Beirut, which opened in the summer, has already had an overwhelming response; every one of its $300,000 chalets was sold prior to the opening. And the prince is not stopping there: a 250-room Four Seasons property is being built in the Lebanese capital.

Nearly 150 new hotels are being developed across the region over the next four years. Indeed, the sector is booming, and banks seem only too willing to open up their vaults to these investments, despite the sector's long return on investment cycle.

The Dubai government has plans to include 80 hotels on the two artificially created islands that make up the Palm Project. Meanwhile, within months of the opening of a Fairmont property in Dubai, Walid bin Talal entered a joint venture to develop a $20 million Movenpick property in the emirate.

Not to be outdone, Bahrain is working on three projects where hotels will play a major role. There is Amwaj Islands project, plus the beach resort developments of Durrat Al Bahrain and Al Dana Resort. To the surprise of many, the island state took in about 4 million visitors in 2001, placing it among the top three Middle East destinations.

Saudi Arabia, with a focus on boosting tourism within the kingdom, has a range of new projects in the works, and has realized that untapped destinations such as Medina have a great deal of potential. Qatar, too, has earmarked a multi-million dollar budget to develop its infrastructure and hotel sector.

Across the Middle East, hoteliers are eager to put the immediate aftermath of September 11th behind them. At the height of the crisis, there was a precipitous 40-50 percent drop in average occupancy rates at hotels across the region. The last quarter of 2001 may well have been the most difficult to date for the Middle East hotel sector, and there was a consensus of sorts that recovery would take a long time.

Leading chains either laid off staff or asked all non-essential staff to take long periods of unpaid leave. Rates were slashed across the board to entice nervous travelers back. But there was no getting around the strict ban imposed by multinationals on their executives flying into the Middle East unless absolutely necessary. Leisure travelers preferred to stay away as an undercurrent of anti-Western sentiment manifested itself in the region.

Some industry sources even resorted to spin in a bid to convince travelers that everything was normal - the general manager of one of Dubai's most prestigious hotels issued statements to the media that he had over 90 percent occupancy and that there were no layoffs. In reality, his hotel was recording 20 percent occupancy and at least 60 staffers were laid off.

However, by the start of the second quarter of 2002, the numbers started to pick up, taking much of the industry by surprise. The summer months - a traditionally weak spot in the hotelier's calendar - were particularly successful.

"It is remarkable that the UAE has managed to bounce back quickly since September 11th.