Middle East hospitality and tourism industry braced for hard times

Special Middle East hospitality and tourism industry braced for hard times
This seaside boulevard in Dubai is one of the many Gulf destinations showing the effects of the downturn. The tourism and hospitality industry in the Middle East has been badly hit by the fallout from the disease. (AFP)
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Updated 19 March 2020

Middle East hospitality and tourism industry braced for hard times

Middle East hospitality and tourism industry braced for hard times
  • Experts describe coronavirus threat as the most damaging for the region's hospitality and tourism sector
  • Religious tourism has suffered with the suspension of entry for pilgrims to Makkah and Madinah for Umrah

As Gulf Cooperation Council (GCC) countries suspend international flights to and from their airports due to the coronavirus outbreak, the tourism and hospitality industry in the Middle East is arguably taking the biggest hit.

As part of a raft of measures to help limit the spread of coronavirus, GCC countries have not only canceled international flights but also introduced measures to limit the entry of visitors.

“There has been a tremendous impact with us, starting at the end of January and the cancelation of Chinese guests,” said Vinayak Mahtani, CEO of bnbme, a UAE-based holiday home management company.

“After this, it seemed to quieten down a bit until the sudden surge in numbers of people being affected. Iran’s numbers haven’t helped the Middle East.”

The firm witnessed a drop in occupancy of nearly 50 percent by March 9. Occupancy had reached only 29 percent, when the target for the month was about 75 percent. 

“We survived last month with guests from Saudi Arabia and the UAE staying with us, both totaling about 65 percent of our guests,” Mahtani said. “I expect this (will) change this month with Saudis also not traveling.”

Starting from March 15, all international flights to and from the Kingdom have been suspended for an initial period of two weeks.

Occupancy aside, hotel room rates have also been adversely affected, with bnbme currently offering summer promotions in advance. Mahtani expects March to continue to be challenging.

“Maybe we can get some good staycation business from the local community as all schools are closed and families are advised not to travel,” he said.

“Our properties are disinfected, and special measures are taken to ensure they’re cleaned well,” he said. “I expect April to start coming (back) to normal, then we have Ramadan and summer, by which I’d expect business to be back as usual. Hopefully we’ll start to recover from the lost first half of the year.”

  • $113 billion - Predicted maximum decline in revenue worldwide in 2020 for air transport.
  • 22 per cent - Decline in travel in Middle East in second half of February.  

Mahtani describes the coronavirus threat as the most damaging for the hospitality industry. As some hotels in Gulf cities temporarily closed at the beginning of this month because of fears of spread of the coronavirus, the industry is trying to strike a delicate balance between ensuring the safety of guests and staying afloat.

“It goes without saying that the safety and wellbeing of our team members and guests remains a paramount priority as we continue to carefully monitor the situation,” said Christopher J. Nassetta, president, CEO and director of Hilton Worldwide Holdings. “We’re working with local governments and health authorities globally to best support our operations and our communities in impacted areas.”

On the basis of the industry’s experience with SARS and other public health crises in the past, Nassetta said it is still “early days,” and Hilton is trying to estimate the potential impact on its business.

“At this point, roughly 150 of our hotels in China — totaling approximately 33,000 rooms — are closed,” he said. “This is an evolving situation. We’re reporting at a time when we know a bunch, but not that much relative to where this thing is going.”

On March 9, the Saudi government suspended the arrival of all passengers from the UAE, Kuwait, Bahrain, Lebanon, Egypt, Syria, Iraq, Italy and South Korea to any of its airports.

Also, religious tourism — including Umrah — suffered a setback when Saudi Arabia temporarily suspended the entry of GCC citizens to Makkah and Madinah unless they had a permit, while tourist visas were suspended for applications from China, Iran, Italy, South Korea, Japan and other countries.

“With more than 115 countries and territories affected globally, (hundreds of thousands of) coronavirus cases, (thousands of) fatalities, ever-growing and mind-boggling numbers by any stretch of the imagination, this certainly is the biggest, global-scale pandemic as long as memory serves,” said Naim Maadad, CEO and founder of Gates Hospitality in Dubai.

Kuwaiti health ministry workers are scanning employees and visitors as they arrive at work. (AFP)

“The panic and imminent danger is evident from the fact that with all the power of modern-day medicine, we’re still yet to find a cure or precisely know what we’re fighting. Only when we know what we’re up against can a remedy be found.”

Maadad said that almost every industry has been affected, “from education, travel, tourism, aviation, maintenance, construction, trading, logistics, cargo and shipping to courier, online trading, food and beverage, hotels, resorts, and health and wellbeing.”

According to global online travel company Cleartrip, a 20 percent drop in travel was recorded over just a two-week period earlier this month, and a 14 percent drop in domestic travel within Saudi Arabia. “The Middle East and Asian regions saw the highest declines — 22 percent and 40 percent respectively — in travel in the second half of February,” said Amit Taneja, Cleartrip’s chief commercial officer.

“These numbers are expected to drop even more following the suspension of all flights to and from Saudi Arabia for ‘all air carriers’ operating from the UAE, Kuwait, Bahrain, Lebanon, Syria, South Korea, Egypt, Italy and Iraq.”

Cancellations went up 42 percent earlier in March, with Saudia — the Kingdom’s flagship carrier — set to refund or rebook tickets for affected travelers. It has also waived all change fees on international flights to and from Saudi Arabia.

“MENA (Middle East and North Africa) destinations such as Bahrain and Saudi Arabia had noticeable drops,” Taneja said. 

“Usually we see a spike in bookings to the Philippines around February and March, but it hasn’t happened to the expected levels this time around,” he said.

“We’ve had high increases in cancelations along MENA destinations, such as the Kingdom, Bahrain, Kuwait and Sudan, followed by Singapore, Italy, France, Germany and Turkey.”

He said the longer the crisis lasts, the more the trend is moving from delayed travel and people choosing other destinations to no travel at all. “We haven’t seen drastic increases in re-bookings, maybe because people are still a bit apprehensive and want to see how everything pans out before making travel plans,” he said. “We’ve had a 23 percent increase in cancelations versus January 2020.”

Mamoun Hmedan, managing director for MENA and India at online travel marketplace Wego, said the impact has been the worst on the travel and tourism industry.

“According to the latest reports, the travel and tourism sector accounts for 10.4 percent of global GDP (gross domestic product) and a fifth of jobs of the global net jobs created over the past five years,” he told Arab News.

“As per the International Air Transport Association, revenue worldwide in 2020 could decline between $63 billion and $113 billion, or as much as 20 percent.”

Hmedan’s sentiments are echoed by Maadad, who said: “The imminent danger here is the lack of information and dearth of cure, which is why panic and extreme measures are leading all industries alike to be affected badly.”

 “Whenever there were other such epidemics there were known facts, hence remedial medication was developed soon to contain the spread. Here, we’re up against the unknown and certainly an uphill battle for a long time to come.”