Widening its appeal: Better accommodation and more business visitors aid the hotel trade

Although the unrest of 2011 has had a knock-on effect in many sectors of the economy, one area which has held up relatively well has been the hotel segment. During the rapid economic growth in Bahrain in the 2000s, a great deal of money found its way into real estate, and within that sector, the hotel industry offered promising returns.

Bahrain continues to have a substantial tourist trade, which was worth around BD538.3m ($1.42bn), or 5% of GDP in 2012, according to the World Travel and Tourism Council, with a particularly strong showing in the weekend/short break and meetings, incentives, conferences and exhibitions (MICE) segments. Although not all projects conceived at the height of the property development boom have come to fruition, a great many of them reached completion and opened in 2012, with further hotel capacity due to follow suit in 2013.

BY NUMBER: According to the latest figures from the Central Informatics Organisation (CIO), the total number of hotel establishments in Bahrain was 102 in 2012 and 101 in 2011. However, the total number of rooms in the country increased from 8364 in 2011 to 9578 in 2012. Of the hotels, 11 were classified as five-star establishments and 39 were deemed four star, according to the CIO. This compares with 11 five-star and 34 four-star properties in 2011, thus indicating a slow upgrading of the country’s hotel stock. Occupancy rates across the spectrum stood at around 33% in 2012, due to the slow recovery from the unrest in 2011.

LUXURY: Many of the larger high-end international hotel chains already have a presence in Bahrain, and capacity at this end of the market has been growing rapidly. In September 2011, the Kempinski Grand and Ixir Hotel opened, which is located at the Bahrain City Centre mall and leisure complex at Seef in the northern suburbs of Manama. The hotel offers 460 rooms, of which 79 are suites, together with a spa, five restaurants, two bars and 15 meeting rooms. The adjacent mall features over 350 shops, a 20-screen cinema complex and a water park. Also in 2011, the five-star Sofitel Bahrain Zallaq Thalassa sea and spa resort opened on Bahrain’s west coast, with 262 rooms, 28 suites, as well as a number of bars and international restaurants.

In 2012, the 166-bed Ramee Grand opened in Manama’s Juffair district, claiming to be the tallest five-star hotel in Bahrain, and featuring seven restaurants and 800 sq metres of conference and meeting space. Majestic Arjaan, part of the Rotana Hotels group, opened in 2013, with 128 apartments and a number of restaurants.

Also in 2012, Marriot International opened a Residence Inn, featuring 80 suites, and in 2016 the company plans to open a JW Marriot hotel as part of the $2.5bn Bahrain Bay Financial District, which will have 274 bedrooms and 102 suites. Also at Bahrain Bay, a 263-room Four Seasons hotel is due for completion in 2014. Additionally, two four-star hotels, Al Safir and Gulf Gate, were recently renovated, each at a cost of about BD2m ($5.26m).

According to figures from Alpen Capital, the value of hospitality projects in Gulf was set in rise from around $2.7bn in 2011 to roughly $7.3bn in 2012.

NEW OFFERINGS: In August 2012, a new 274-bed Holiday Inn Express opened in Manama’s Exhibition Road district, representing a major step forward for the development of three-star accommodation of a decent standard. At present, Bahrain has 2565 rooms in the three-star class or below. However, much of this is in establishments where standards are below international levels.

Many travellers, particularly in the family segment, feel that in order to reach a minimum standard of acceptable accommodation, they need to trade up to the four- or five-star class, thus putting the cost of accommodation higher than it would be otherwise. However, the authorities are looking to gradually upgrade the quality of accommodation on offer at the lower end of the market, and this is raising standards as hoteliers seek to make improvements in order to retain their star rating.

In 2014 a 304-bed Ibis hotel, which caters to the three-star market, is due to open in the Juffair district, which should only help to further increase the accommodation options available.

Partly for this reason, but also due to cultural norms that emphasise the importance of privacy, furnished apartments continue to be a popular alternative to hotels in Bahrain. According to CIO figures, the country counted approximately 286,000 rooms in apartment hotels and the occupancy rate for this type of accommodation was slightly higher than that of hotels – some 37.5%. As with hotel accommodation, the range of facilities on offer in the furnished apartment segment varies in line with the price, but many apartment complexes are classified in the four- and five-star range in Bahrain.

THE ROAD AHEAD: Over the near term, the main challenge for the Bahraini hotel industry is maintaining demand levels. By the time the present crop of hotel projects is complete, Bahrain is likely to have more hotel capacity than it can fill, given present occupancy rates and tourist arrivals. The ongoing issues at Gulf Air, Bahrain’s national carrier, which is undergoing a restructuring process that has seen the number of routes it serves drop from 120 to 40, has also had an effect on the hotel sector, as business and leisure travellers alike often opt for destinations with a direct connection to their departure airport.

However, the tourism industry in the Gulf is growing fairly rapidly, with Alpen Capital projecting a compound annual growth rate of around 8.1% between 2011 and 2016. Over the same period, Alpen predicted the value of the Bahraini hospitality market to grow by 18.8% a year, and for occupancy rates in the hotels sector to reach 56% by 2016.

Furthermore, Bahrain is working hard to develop its niche and differentiate itself from its neighbours in terms of tourism offering. One of the island’s strengths is that – despite hosting big-name events such as the annual Formula One race – Bahrain is quieter than a number of nearby destinations. By focusing on this aspect, the kingdom can appeal to both local and foreign families attracted to the island’s cultural mix and heritage, and who are looking to appreciate its slightly more relaxed pace of life. The push to a greater focus on value in accommodation (remembering that families in the region are often large, and as such their budget for holiday accommodation is often limited) looks set to reinforce this trend.

MICE: The ongoing development of the MICE industry should also complement the hotel industry in the kingdom. A significant proportion of MICE business in Bahrain tends to be primarily regional in nature, and as such, is less affected by the decline in international visitor numbers. The segment has focused on providing value-for-money, offering lower rates than many other Gulf destinations, but with facilities that remain of high quality.

In order to help support the business, the MoIC is planning to develop a new exhibition and conference complex, expo@bahrain (also known as Expo City) as early as 2015, at Sakhir on the west coast of Bahrain. Expo City will feature three-, four- and five-star hotels with a combined total of approximately 1200 rooms, as well as a number of international restaurants and bars, creating a self-contained resort geared to the MICE industry, which is expected to help the kingdom continue to attract business.

While no finalised details had been released at the time of publication about which hotel brands might be involved and the exact number of rooms the new development will bring, the Expo City has the potential to cement Bahrain’s position as a business and leisure tourism centre, to the benefit of the hotel industry across the island. It will also offer access to the Bahrain International Circuit, the venue for the Grand Prix Formula One race. The overall impact that will be generated following commissioning of Expo City in 2013 has been estimated at about $306m.