Dubai skyline at night (Ivan Siarbolin/Pexels)

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“Hospitality will win through”: A view from Dubai amid the pandemic

7 April 2021 | By GCR Staff | 0 Comments

In March, Paul Boldy FCIOB became the Middle East managing director of RLA Global, an advisory and management consultancy to the leisure and hospitality sector. A 17-year veteran of Dubai property and construction, he tells GCR how the pandemic has affected the hospitality sector and what the next few years will bring.

What’s the mood of investors in the Gulfs hospitality real estate these days?

Paul Boldy FCIOB is the new Middle East managing director of RLA Global, an advisory and management consultancy to the leisure and hospitality sector (Supplied)

The Gulf region is traditionally bullish in its approach to challenges, be they global financial downturns or a global pandemic. However, the current crisis, coupled with the recent slump in oil prices has affected investment, particularly on government funded projects.

Visionary leadership in the Gulf Cooperation Council (GCC) has meant that innovation and strategic growth have become watchwords for the region and, as such, there is still an underlying optimism for recovery and for a stronger outlook.

We are seeing some delays in projects as investors are reconsidering previously developed feasibility studies that are no longer relevant. The silver lining is that the development of hotel assets, and to a certain extent the distressed feasibilities, can be revived through a granular approach to a new value proposition in the market using metric analysis, ensuring investor ambitions can be met.

The hospitality sector still represents a valuable asset class to investors, and whilst the pace of new construction has not slowed down disproportionality to the pandemic, what is emerging is a stronger movement to repurpose, reposition and renovate.

A repositioned or renovated hotel will increase an asset’s value and, with the real estate sector still showing positive growth, hotel real estate investment remains strong.

How has the pandemic affected the hospitality real estate market?

Like all sectors, the Gulf’s hospitality sector has been impacted by the pandemic. From projects under development to operational hotels, the region has experienced delays and falls in occupancy.

But while positive efforts to get back to economic normality have had mixed results, the economy does show signs of improving, driven primarily by domestic demand. With travel restrictions in place, hospitality has been buoyed by domestic tourism.

It has been interesting to see how fast hospitality operators have embraced enhanced guest safety, and how fast they have evolved their value proposition. A new guest profile has emerged: people who are keyed into a more ethical and experiential offering.

It is certainly true that projects have had to be rethought, budgets cut, and business models reassessed, but hospitality will win through; people will want to travel, and the region has exciting prospects in store with the current and planned developments.

And what has been the effect on construction projects?

We have seen casualties in the contracting market, and some notable exits, with consequences on supply chains and financial institutions causing liquidity issues for suppliers, contracting parties and developers alike. The upshot is an obvious rise in project delays and contractual disputes.

Contractors also face significant challenges given the increased restrictions on labour movement, increased costs in implementing health and safety measures, and supply chain logistics challenges.

Dubai was particularly supportive of the construction sector during the height of the pandemic, when much of the UAE was in full lockdown. The construction sector was deemed to be a vital sector, exempting it from government restrictions and allowing work to continue.

The new hotel pipeline in the region remains strong with Saudi Arabia leading the development, closely followed by the UAE.

What developments should we be looking out for in the Gulf’s hospitality sector in the next few years?

The hospitality sector’s response to the pandemic has been inspiring. We’re working on projects now that will shape the sector’s landscape for years to come.

The guest demographic for both domestic and international markets is changing. We’ve seen continued growth in the mid-market sector as the region moves from a luxury-led market to a combined leisure and hospitality offering.

The pandemic has accelerated progress in hospitality, bringing changes that were long overdue in some areas. A more focused approach to the guest needs is driving better returns from rooms and food and beverage and shaping co-living and co-working concepts where hospitality can play a central role.

Operators are shaping new concepts to take account of the changes and finding ways to reduce costs, whilst maintaining or increasing guest satisfaction, the essence of added value.

We are also moving towards greater sustainability as the value proposition has changed. This is also manifesting itself in methods of construction for new hotels, with modular hotels gaining traction in the planning of larger properties as it reduces waste and timelines, while complying with new on-site health and safety protocols.

Another trend impacting construction projects are the various smart city initiatives. Connectivity within hotels has typically been high on the list of guest frustrations. Technology is now being put at the forefront of the guest experience as the region embraces all things ‘smart’.

What is your three-year outlook for Gulf’s hospitality real estate, and what is driving change?

We will continue to see progress on the Saudi giga projects, rolled out as part of Vision 2030, including Neom, the Red Sea Project, Qiddiya, Diriyah Gate and Amaala. They will provide a major boost to the construction sector as well as tourism, hospitality and leisure.

The Dubai Expo 2020 will launch in October 2021 and run through to March 2022 and the Qatar World Cup will run through November and December 2022, providing a boost to tourism and leisure.

The signing of the Abraham Accords in September 2020 and the normalisation of relations between the UAE and Israel provides an added opportunity for new tourism markets.

The launch of Dubai 2040 Master Plan signals the country’s intent to make Dubai one of the world’s best cities to live and work, with major initiatives centred around the public realm, the planning of which will add a new dimension to the hospitality sector and drive the change in how we shape and define projects for both the domestic and international markets.

You’ve been in Dubai for 17 years. Can you give us a flavour of how things have changed in that time?

I’ve witnessed incredible changes over the years. From record breaking structures like the Burj Khalifa, to man-made islands such as the Palm Jumeirah, Dubai has pushed forward with ambitious and innovative plans.

As economies move away from a reliance on oil, tourism and hospitality form an ever-increasing contribution to the region’s GDP. Dubai has been the regional success story in terms of increasing the percentage of its GDP attributed to finance and tourism. The establishment of the financial markets and the opening up of foreign ownership in real estate influenced a property boom, which continues to mature.

I have also witnessed the Emirates’ hospitality sector grow to be a global player. Dubai became the benchmark for the region and still holds an enviable position with sustained occupancy and iconic projects and developments inspiring the rest of the region and the world.

Events such as Expo 2020 will further enhance, and provide a substantial boost, for the region’s tourism, and with the 50th Anniversary of the UAE in 2021, and the launch of the 2040 vision, I have no doubt that the place I call home will continue to prosper and inspire generations of Emiratis and expatriates alike for years to come.

Top image: Dubai skyline at night (Ivan Siarbolin/Pexels