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From hotel survival to sudden expansion. Is hospitality back?

2020 was a tough year for every business, but none more so than the hotel business and hospitality in general. But now, the mood is changing and hotels, at least in this region, are planning for a major expansion

Hotels with occupancy rates down 30% are getting in on the ghost kitchen trend Hotel operators are also offering up underutilized hotel rooms as office space Rotana will deliver more than 2,650 new room keys to the market

2020 was a tough year for every business, but none more so than the hotel business and hospitality in general.

In fact, it was so bad that hotels had to rent out their kitchens and rooms to make way for cloud kitchens and remote work and generate enough income to stay afloat.

But now, the mood is changing and hotels, at least in this region, are planning for a major expansion.

What gives?   

Ghost kitchens 

Hotel room revenues may have tanked during the coronavirus pandemic, but some leading operators in the industry hope underutilized kitchens can pave the way for future profits.

The trend has been ghost kitchen pairing between hotels and an outside food operator and this took place even before the pandemic depleted hotels of high occupancy rates and coveted businesses like corporate travel and conventions.

Full-service hotel owners were already struggling with food and beverage programs generally operating at a loss

COVID-19 made it much worse to turn a profit or stay operational for that matter.

Those underutilized spaces now may become a rare segment of profitability while the global hotel industry lumbers along an uncharted pandemic recovery path. 

The hotel industry in general, where occupancy rates are still down 30% from a year ago, is getting in on the ghost kitchen trend.

The pandemic has opened the business model to more entrepreneurs. Paying $5,000 to $6,000 a month for a fully outfitted catering kitchen is mild in comparison to a cloud kitchen that can run from $200,000 upwards.

“Everybody’s happy: Hotels are happy they can charge monthly fees on an unused kitchen,” said Richie Karaburun, a professor at New York University’s Jonathan M. Tisch Center of Hospitality. “Customers are happy they can get more choices. Entrepreneurs are happy they don’t have to invest so much money and time for a restaurant.”

Read: Workation trend will boost Middle East hotel sector

Read: Gensler: The Healthy Hotel – Designing for a new experience

Rooms turned into office spaces  

The ghost kitchen partnership isn’t the only one to emerge from the pandemic. Struggling hotel operators are also offering up underutilized hotel rooms as office space to rent at a time when most people are staying away from their traditional workplace.

Major brands like Hyatt, Mandarin Oriental, and Marriott all have some variation of the work-from-hotel concept.  

Ghost kitchens and rooms for rent offering a reliable revenue stream to hotel owners draw comparisons to WeWork.  

Rotana announced an expansion plan

Rotana, one of the leading hotel management companies in the region, recently announced additions to its pipeline for the next 3 years, comprising eight new landmark developments. Significant hotel signings and new agreements will take place in Manama, Bahrain, and Jubail in the Kingdom of Saudi Arabia, alongside further expansion in the UAE, Qatar, and Turkey.

Rotana will deliver more than 2,650 new room keys to the market. 

“We are extremely confident the UAE will remain one of the safest countries in the world for domestic and international travel. With the launch of the first federal domestic tourism campaign boosting the country’s local tourism contribution to more than AED80 billion ($21.8bn), coupled with the vigorous nationwide vaccine drive and steady growth in inbound tourism, the outlook for the industry is bright,” said Guy Hutchinson, CEO, and President of Rotana Corporation.

Rotana has also penned two deals in Qatar, with the aim of supporting the country’s economic diversification strategy and its vision to attract 7 million visitors by 2030. 

Rotana currently manages a portfolio of more than 100 properties throughout the Middle East, Africa, Eastern Europe, and Turkey.   

Positive news for the hotel industry

The UAE government announced that it aims to vaccinate half of the population by the end of March 2021.

As vaccination numbers increase, confidence among visitors to stay in hotels increases.

“During the COVID-19 pandemic, the UAE has been perceived as one of the world’s safest destinations, and the country’s vaccination drive will likely reinforce its position as one of the safest tourism destinations,” says Christopher Lund, director, head of hotels (MENA region) for Colliers International.

In December, China had the highest occupancy levels in the world at 58%, while the Middle East came second with a 54% occupancy level. 

Philip Wooller, area director for the Middle East & Africa at STR, a division of CoStar Group that provides market data on the hotel industry worldwide, said: 

“The UAE’s occupancy growth over recent months has been driven by strong domestic demand and local carriers opening to more destinations. Dubai’s tourism organizations, as well as Etihad and Emirates airlines, have done an effective job in preparing the way for international guests to return, following the latest announcement from Emirates airlines to become one of the first airlines in the world to trial IATA Travel Pass.” 

A comeback year for UAE travelers, and more hotels on the way

Almost 18 million passengers passed through the Dubai Airports in 2020, despite the COVID-19 pandemic, according to the latest figures released by the General Directorate of Residency and Foreigners Affairs (GDRFA).

The Dubai Shopping Festival is back as well as travel and food displays like Gulfood, Arabian Travel Market, and The Hotel Show.

Also, the World Expo2020 is quickly drawing closer to October 2021.

According to Top Hotel News, “2021 will bring 135 new hotels and 36,200 additional keys to the Middle East on current estimates.” 

Another 206 properties are scheduled to go live in 2021, bringing 63,719 extra rooms into play. 

Additionally, 113 projects are underway for 2022 which will yield 34,334 more keys. 

Only 49 new hotels have been signed off for 2023, and 142 more hotels are on the books for 2024 and beyond.