Will Too Many Empty Hotel Rooms in Middle East Require a New Business Model?
Photo Credit: An oversupply of hotels rooms in places like Dubai (pictured) is prompting third-party management companies to offer their services. Visual Hunt / Rickisfriends
Skift Take
Third-party management is a relative unknown in the Middle East’s hospitality landscape. The challenge that white-label companies face is convincing owners and operators to relinquish control.
The oversupply of hotel rooms across the Middle East is a problem that shows no signs of abating. Mounting costs and a need for profitable solutions is prompting conversations over whether third-party management agreements will be the future, much like those used in the U.S. and Europe.
First, take a look at the numbers.
The Middle East saw a 9.3 percent year-over-year increase in hotel rooms in construction as of April 2019. That month’s pipeline data showed 424 hotel projects accounting for 125,052 rooms in construction in the Middle East. United Arab Emirates led with 56,701 rooms, which represented 33.6 percent of the country’s existing supply, followed by Saudi Arabia (42,571 rooms, 42.9 percent of existing supply), according to STR data.
Zeroing in on Dubai, STR’s data for the second quarter of 2019 revealed that supply has now outgrown demand in the city for six consecutive quarters, and the occupancy level was the lowest for a second quarter in Dubai since 2009,
