_The future of Bahrain’s hospitality sector
Looking ahead we may begin to see international visitation from outside the region increase as the country’s national airline expands its network and improvement works are completed at Bahrain International Airport.
Due to the nature of visitation in Bahrain, the hospitality market has historically had challenges in relation to driving occupancy rates. Over recent years we have seen average occupancy decline from 56% in 2014 to 52% in 2018. Over the same period, ADR and RevPAR decreased by 23% and 28% respectively.
This softening in key performance indicators (KPIs) was attributable to falling oil prices which not only impacted the domestic market, but also the wider gulf economies, which in turn has resulted in subdued corporate demand. Leisure demand has been impacted by the rift between Qatar and Bahrain (among other nations). More so, in the medium to long term we expect demand will be further impacted as entertainment led destinations are delivered in Saudi Arabia.
As of year-end 2018, Manama’s hospitality supply consisted of 13,000 keys (11,000 hotel keys and 2,000 serviced apartment keys) primarily composed of 4 and 5 star hotels which account for 40% and 39% of the total room supply respectively.
The future
Looking towards the future, 3,300 keys have been announced to come online by the end of 2022. This represents a supply increase of approximately 25%. As more quality internationally branded properties enter the market, we expect locally operated and less centrally located properties will ultimately lose market share.
The short to medium term outlook for the market remains subdued as a result of additional supply scheduled to enter the market and the implementation of VAT which is likely to create further pressure on KPIs. The expansion of supply, where the total key count is expected to grow 25% by 2022, is likely to impact the top end of the market most given that the vast majority of additional keys set to be delivered are in either the 4-star or 5-star segment of the market.
Demand generators
Bahrain is considered to be a well regarded leisure destination and Manama has been established as a trading outpost for the Middle East since the early 1970’s. As the government continues to diversify the economy and promote the location as a credible tourist and leisure destination, it will be able to drive demand beyond its traditional base.
The expansion of supply, where there are several key tourism related projects that have already been completed, are detailed below.
For more information on the Bahrain commercial and hospitality market, read the Knight Frank report here:
Read similar blogs here:
Is now a good time to rent Commercial space in Bahrain?