Introduction to mid-market resorts in the GCC

Introduction to mid-market resorts in the GCC

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Christopher Lund and Thuku Kimani from Colliers International examine the case for mid-market resorts in the GCC nations of the UAE, Oman, Saudi Arabia, Kuwait and Bahrain

For the purpose of this article, we have defined mid-market resorts as follows:
• 3-Star and 4-Star resorts
• Hotels with direct access to a major leisure demand generator
• Hotels with a strong leisure demand base compared to other demand segments

The different kind of resort types in the region include beach resorts, city resorts, desert resorts, mall hotels, marina hotels and nature resorts, as shown in the exhibit below. Examples of typical mid-market resorts include Aloft Palm Jumeirah in Dubai, the upcoming Hampton by Hilton and Rove on Al Marjan Island in Ras Al Khaimah.

Mid-market resorts in the GCC today
According to research at Colliers International, there are currently approximately 55,000 resort keys in the GCC, encompassing all levels of luxury. From the total GCC resort supply, only 17 percent are categorized as mid-market resorts and only 6 percent of total GCC mid-market supply is categorized as mid-market resorts. Moreover, the majority of the supply is not affiliated with an international operator/brand and no single international operator has a presence that exceeds over 1,000 keys.

The KSA has the largest composition of mid-market resorts as a share of resort supply, representing 35 percent of total resort supply. However, the UAE has the largest existing supply of mid-market resorts, as well as the largest pipeline. The mid-market resort supply in the UAE is forecast to grow at an average annual rate of 15 percent from the end of 2018 to 2022, Colliers said.

Some of the key success factors for the mid-market resort segment include being able to reach the international mass market, as well as price-sensitive domestic tourism. Accessibility is a key parameter with these resorts, although properties that are very central are usually avoided, since this tends to increase the cost of land for investors and room rates for hotel guests. Mid-market resorts are now increasingly targeting the growing price-sensitive travelers in the GCC, buoyed by the rapid increase of inbound travel from source markets fitting this criteria, such as India and China. There is growing evidence that greater opportunities exist in developing and investing in mid-market resort assets, since they typically have lower development costs, low barriers to entry and a less competitive landscape when compared to the upper-tier, 5-Star resort segment.

Opportunities for mid-market resorts in the GCC
United Arab Emirates
Given their tourism product and resources, each of the seven emirates is well suited to introduce mid-market resort supply offerings to complement the existing resort supply. Typical mid-market resort opportunities include:
• Beach resorts (all seven Emirates)
• City resorts (Abu Dhabi and Dubai)
• Nature/heritage resorts (Northern Emirates)
• Desert resorts (all seven Emirates)
• Theme and water park resorts (Dubai, Abu Dhabi and Ras Al Khaimah)

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Oman
Oman is home to many eco, cultural and heritage attractions including four UNESCO World Heritage sites, which demonstrates its strong potential for resort supply. Several marketing campaigns have been launched in recent years, including Oman Tourism Development Plan 2040, in an effort to further promote tourism in the country. Given the tourism product and resources, key destinations for mid-market resorts include:
• Beach and city resorts (Salalah, Muscat and its surroundings)
• Desert and nature/heritage resorts (Nizwa, Jabal Akhdhar and Jebel Shams)

KSA
Currently, Riyadh (city resorts and Istirahas), Jeddah (beach resorts) and Greater Dammam (beach resorts) represent the main resort destinations in KSA. However, leisure and entertainment tourism represents an integral part of the Vision 2030 plan, which includes objectives such as development of facilities and entertainment options to sustain tourism growth in the country. Although the upcoming high-profile resort developments are likely to focus on 5-Star resorts, an abundance of mid-market resort opportunities still exist throughout the Kingdom, which would appeal primarily to the domestic and regional segments, as well as religious tourists extending their stays beyond Makkah and Madinah.

Kuwait
The government of Kuwait is increasing its focus on the development of leisure tourism within the country. This is evident in the country’s most recent economic plan – Kuwait Vision 2035 – and the numerous mega projects, such as Silk City, which have been earmarked for development. This gradual advancement is expected to open up long-term opportunities for the resort segment in Kuwait, which has historically been smaller than those of its GCC peers.

Bahrain
Bahrain’s millennia-long history as a trading hub, which dates back to its role as a key node between Mesopotamia and the Indus Valley, has provided it with an unusually rich legacy of archaeological and historical landmarks, including two UNESCO heritage sites. The kingdom also boasts a flourishing shopping and entertainment sector which attracts a healthy base of regional inbound travelers by road. These fundamentals provide a strong argument for the development of resorts, especially the mid-market variety, to complement the existing and planned high-end resort supply, which is significantly higher than in other segments.

colliers.com

Christopher Lund


Thuku Kimani

“Beach resorts are the most common typology of mid-market resorts in the GCC today”

Internationally branded mid-market hotels (as % of total mid-market supply)

UAE58%
OMAN31%
KSA20%
KUWAIT0%
BAHRAIN49%

GCC mid-market resorts (existing supply by type)

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