Heavy lifting: Hotel investments are ramping up capacity ahead of 2022

Recent years have brought a flood of activity for hotel and resort developers in Qatar. Ahead of the 2022 FIFA World Cup, the government plans to invest $20bn in tourism infrastructure, the Qatar Tourism Authority (QTA) said at Dubai’s Arabian Hotel Investment conference in May 2013. Hosting the influx of visitors expected for one of the world’s highest-attended sporting events is no small feat. In 2010 over 300,000 tourists went to South Africa to watch the World Cup, according to the country’s tourism ministry. FIFA estimates that Qatar will require 50, 000-60,000 rooms to accommodate the 500,000 visitors expected to attend the tournament. In preparation, the authorities have laid out a schedule for ramping up hotel room capacity. According to the QTA, the country has 14,000 hotel rooms at present and 5000 more are currently under construction. An additional 15,000 rooms will be added based on demand, bringing the total to 34,000, and the rest will be covered by other means, such as cruise ships. Both multinational and domestic developers are announcing project plans across the state, and the results are visible, as new hotels open their doors and others begin to rise out of construction sites.

Capacity Boost

International hotel operators have announced several openings in recent years. The steady interest from these brands has brought an influx of foreign capital and expertise into the country’s hospitality sector. In 2012 three major operators, St Regis, InterContinental and Hilton, all opened new Doha locations. Thailand-based hotel brand Amari opened a Doha location in January 2013, marking the group’s first venture abroad. Another East Asian brand, Hong Kong-based Shangri-La, is also working on two hotels, Shangri-La Doha and Traders Hotel Doha, both of which are expected to open in 2014. Farther down the line, Hilton Worldwide signed a management agreement with Doha-based La Jolla in March 2013 to open the country’s first Waldorf Astoria. The luxury accommodation project will include 250 rooms and 80 serviced apartments. The hotel’s planners aim for the site be open by 2016.

Resorts

Local developers are also making considerable investments in hotel and resorts. Doha-based developer UrbaCon Trading & Contracting is nearing completion of construction of its Banana Island Development off the coast of southern Doha, set to open in April 2014. The 12.9-ha island will host the Anantara Hotel Island resort, a 141-room facility set to include a marina, restaurants and cinema.

Katara Hospitality, the tourism investment arm of Qatar Holding, is developing several properties as well, including Katara Towers in Lusail Marina, an iconic structure designed in the shape of the seal of Qatar.

The 614-room property is due to open in 2017.

In May 2013 state-owned real estate investment firm Barwa announced plans for three major projects to be completed by 2022. Oryx Island, a mixed-use development off the coast of Fox Hills site in Lusail City, is set to include three five-star hotels and over 200 private villas. During the 2022 FIFA World Cup, organisers plan to dock cruise ships at the island to provide a temporary boost in bed counts.

Local Comforts

In total, the island is set to host up to 25,000 people, Barwa Group CEO Abdulla Abdulaziz Al Subaie told reporters at Doha’s Qatar Cityscape real estate conference in May 2013. In addition to its capacity to host visitors, the island will also include commercial attractions, such as a shopping avenue, an aquapark and an open-air theatre to be used as a viewing venue for World Cup matches. Unlike other areas in Doha where parking and traffic requirements are a top logistical priority, the island is designed solely for pedestrians. Planners are working to create a transport system for the complex using electric vehicles, water taxis and ferries.

The entire development, which was still in the conceptual phase at the time of publication, is expected to cost QR20bn ($5.5bn) and will take seven to eight years to complete once construction begins.

Two more major projects of the state-owned developer are Dara and Gulf Resort, both planned onshore. The QR8bn ($2.2bn) Dara project at Fox Hills, Lusail City, is set to spread 176,000 sq metres with 1000 apartments and 53 buildings, split into two zones, one residential and one mixed-use. The location is walking distance from the stadium that will serve as the venue for the 2022 FIFA World Cup’s opening and closing ceremonies, and the project could also be helpful in housing the expected influx of football fans. The Gulf Resort project, meanwhile, covers an area of 250 ha and is set to include three hotels and a shopping mall built around a natural harbour.

Boutique Options

Apart from the larger, resort-style developments in the pipeline, the state is also experimenting with boutique hotels. Across the region, global brands and grandiose projects have been the predominant trend, but some in the sector are beginning to think that less is more.

Stakeholders in Qatar are placing their bets on a similar trend. Souq Waqif Boutique Hotels (SWBH), for example, has opened five locations in Souq Waqif, a shopping district built to replicate the style of a traditional Arabian souq. The state-owned development firm’s properties have been purposely kept small, no more than 40 rooms. With this smaller size and souq location, SWBH aims to create a more intimate experience, providing an alternative to large resorts. In response to better-than-expected performance of its first properties, SWBH has opened a new hotel, the 36-room Al Bidda, and plans to add another new location, the 13-room Jamrok.

Focused Ahead

In the short term, a surge in hotel and resort construction could realise several key priorities, fuelling growth in the construction and real estate industries and building up enough rooms to fulfil the state’s commitments for 2022. Following these temporary boosts, however, some operators point to possible over-capacity leading up to and following the World Cup. At an April 2013 general managers debate in Doha sponsored by Hotelier Middle East, managers from the Four Seasons, Shangri-La and other brands said that stiff competition has led to falling rates. The authorities acknowledge that continual construction could lead to over-capacity leading up to and following the World Cup.

“We are working to keep the private sector well-informed on occupancy rates and room counts so market players can invest in new hotels based on solid data,” Hassan Abdulrahman Al Ibrahim, strategy development director at the QTA, told OBG.

Other solutions, such as utilising the hotel capacity of nearby Bahrain and accommodation on cruise ships, are also on the table. “We are looking into ‘floating hotels’ and hotels in neighbouring countries, but of course we will only be able to judge in detail closer to 2022,” Al Ibrahim said.

In Figures

Data from 2013 shows that stats have largely held steady despite growing hotel capacity. Although the number of hotel rooms grew 1.27% between 2012 and 2013, overall occupancy rates grew as well, from 60% to 65% during the same period, according to QTA data. Four- and five-star hotel revenues improved year-on-year, as well. Five-star facilities saw revenues increase 15.9% from QR2.45bn ($671.1m) to QR2.84bn ($777.9m), while four-star ones saw revenues grow 3% from QR740m ($202.7m) to QR718m ($196.7m), according to the QTA. Between 2012 and 2013, average revenue per available room rose 7.1% from QR372.4 ($102) to QR398.85 ($109.25), while average total revenue per available room increased 8.1% from QR773.90 ($211.97) to QR837.08 ($229.28).

Higher revenues for luxury hotels are important for the industry as a whole, since the lion’s share of planned hotels fall into this category. In the next five years 21 hotel properties are scheduled to come on-line. More than half of these are set to be five-star properties, while nine more will be four-star offerings. These new developments are entering a sector already tilted towards serving the upper end of the market: as of 2012, 45 of the state’s 81 hotels had either four or five stars.

Down The Road

The long-term returns on these hospitality investments will ultimately depend on the sector’s ability to continue attracting visitors independent of the boost offered by the World Cup. Some stakeholders remain optimistic that visitor numbers will climb ahead of the tournament, thanks to steady business tourism growth and more leisure tourism. Tourist arrivals are expected to reach about 3.7m by 2022, Reed Travel and Exhibitions portfolio director Mark Walsh said to press delegates in February 2013. “Qatar will see a transition from a predominantly business-led visitor profile to a stronger business-leisure mix, with the football World Cup a milestone marker for the hospitality and tourism industry.” Whether the boost comes from continued business tourism growth, more leisure travellers or some combination of the two, an increase in arrivals seems to be the lynchpin to the industry’s success.