2007 Bahrain Country Snapshot

Transcription

1 2007 Bahrain Country Snapshot Hadrien Pujol, Associate Director Bernard Forster, Director HVS INTERNATIONAL LONDON 7-10 Chandos Street London W1G 9DQ (Fax) April 2007 New York San Francisco Boulder Denver Miami Dallas Chicago Washington, D.C. Weston, CT Phoenix Mt. Lakes, NJ Vancouver Toronto London Madrid New Delhi Singapore Hong Kong Sydney São Paulo Buenos Aires Newport, RI

2 Bahrain Snapshot London office of HVS International Hadrien Pujol and Bernard Forster Economics and Politics Bahrain has always been seen as a more open and liberal country in the Gulf. Its economy is one of the most diversified and least reliant on oil in the region. According to the EIU, Bahrain s economy has grown by 7.8% in 2006 compared to 5.9% in Politically, 2006 witnessed a successful democratic election whilst, economically, the country has received increased praise from international investment rating agencies. Moody s and Fitch, ratings agencies, have both upgraded the country to a positive outlook thanks to the management of oil and gas receipts and refined products and the diversification and strengthening of financial services. The Gulf-wide stock market shock in March 2006 resulted in Bahrain s stocks losing some value, ending one percentage point up at year end, while Saudi Arabia and Kuwait were more affected. The Free Trade Agreement with the USA, which came into effect on 1 August 2006, is likely to have a positive effect on the economy, specifically in the services and banking sectors. The government of Bahrain is offering permanent residence to nonnationals who buy real estate in one of the new development projects (Durrat Al-Bahrain and the Amwaj Islands). The main opposition group has become the largest elected group in parliament in the election held in November 2006 following a boycott in the first election in The increase in conservatism in parliament could affect the hospitality industry in Bahrain. A government decision will ban the licenses of nightclubs in all one-, two- and three-star hotels from March and will allow licenses for the sale of alcohol only in five-star hotels from May. The hotel owners association has filed a lawsuit at the administrative court demanding the cancellation of this decision. The travel and tourism sector in Bahrain is expected to generate US$4.5 billion of economic activity in 2007, and is expected to account for an

3 impressive 20% of GDP. It is expected to grow by 14.5% in 2007 and by 6.3% per annum, in real terms, between 2008 and Developments and Initiatives Plans have been put in place to expand the airport; phase one, which is due to be completed in the next two to three years, is expected to cost approximately US$175 million. The project includes nine new air bridges, including ones designed to accommodate the new Airbus A380 super jumbo plane, bringing capacity up to 14 million passengers a year. While the UAE has its Palm Islands and World, and Qatar its Pearl, Bahrain has a trio of significant master projects: Amwaj Islands, Durrat Al-Bahrain and Two Seas. There will also be two waterfront communities in Bahrain Bay and Lulu Island. We expect these developments will induce a significant amount of leisure demand in Bahrain. The Bahrain Bay development is a joint venture between Arcapita Bank and another Bahrain-based investment group. The US$1.5 billion Bahrain Bay development will be a mix of commercial, residential and retail space all set around the Manama waterfront including a Four Seasons hotel. The US$1.3 billion Bahrain Financial Harbour (BFH) is located on the northern shore of the main island of the kingdom of Bahrain and within a fifteen minute s walk of the historic centre of Manama. The development is adjacent to the commercial centre Bab Al Bahrain and covers an area of approximately 38 hectares. The master project Lulu Island will be built on a man-made island of approximately 55 hectares and the total development cost is envisaged to be around US$500 million. It is envisaged that the master project will offer numerous upscale villas, apartments, hotels and a conference centre. The US$1 billion Amwaj Islands project commenced in 2004 and most elements of this city development are expected to be completed by The project comprises a group of man-made islands covering approximately 280 hectares on the north coast of Muharraq Island, near Bahrain International Airport. Durrat Al-Bahrain is a 20 km² seaside city resort located 25 km from the capital Manama, in the south of Bahrain, near to the planned Bahrain/Qatar causeway. It features 13 islands with more than 2,000 villas, 3,000 apartments and townhouses, a five-star hotel, an 18-hole golf course, an aqua park and various other leisure and retail facilities.

4 Visitation and the Hotel Market Bahrain International Airport experienced a 20% increase to 6.7 million passenger movements in Tourism currently contributes between 10% and 12% of the country s GDP; however, the government s objective is that in ten years this will be no less than 30%. The Economic Development Board (EDB) has been working on the development of the country s comprehensive tourism strategy and master plan. The EDB is also in the process of establishing the Tourism Development Board (TDB) in order to bring the country s tourism vision to fruition. The TDB will be a government agency with significant private sector representation. It will provide investors in tourism with the right legislative and planning infrastructure through coordinating developments and regulating the tourism industry. Marketwide average rate in Manama is dictated by a price regulatory system operating between five-star hotels. Marketwide average rate increased by 11% in The recently opened hotels and refurbished properties have achieved above average growth in average rate. The incremental commercial demand generated from the development of Bahrain s mega projects is increasingly putting pressure on the already limited internationally branded supply, which resulted in the recent increase in average rate. Occupancy at quality hotels in Manama has decreased from 75% in 2005 to 71% in We consider that the reliance on business-related demand hampers the current market performance. We note that the major development projects taking place in Bahrain are likely to induce significant amounts of leisure-related demand in the medium term. The 5% increase in RevPAR on 2005, to US$140, has not been reflected in GOPPAR which declined by 8% to US$107 in New openings in 2006 were limited to the 121-room Mercure hotel in the Seef area. Further additions to supply are below.

5 Proposed Hotels Bahrain Hotel Name Number of Rooms Opening Date Location Banyan Tree, Al Areen Al Areen Marriott Executive Apartments Juffair Somerset Apartments Juffair Diplomat Radisson Apartments Manama Proposed Hotel, Bahrain Financial Harbour Manama Renaissance Amwaj Amwaj Islands Tulip Inn Manama JAL Resort Amwaj Islands Kempinski Manama Fraser Apartments Manama Holiday Inn Al Seef Seef 2009 Openings 1, Openings Source: HVS Research Outlook and Opportunities Bahrain is relying heavily on the Saudi market when it comes to tourism. We expect that the creation and implementation of a homogeneous tourism vision will help promote Bahrain as a quality tourism destination in the region and elsewhere. There are a significant number of hotel rooms under construction. The majority of this new supply is classified as five-star and luxury hotels, extended stay and resort destination. We recommend the development of a midscale and limited service hotel offer to cater to the regional market. We are also cautious on the development of alternative hotel asset classes (timeshare and condominium products) due to the current absence of specific legislation in Bahrain. The creation of the Durrat Al-Bahrain, Amwaj Isalnds and Two Seas mega projects will position the country as an attractive leisure destination to regional visitors. In the meantime, these projects are likely to bring international exposure to the country.

6 No investment decision should be made based on the information in this survey. For further advice please contact the authors. About our Team HVS International has a team of Middle East experts that conducts our operations in the MENA region. The team benefits from international and local cultural backgrounds, diverse academic and hotel-related experience, in-depth expertise in the hotel markets in the MENA region and a broad exposure to international hotel markets in Europe. Over the last 24 months, the team has advised on more than 100 hotels or projects in the region for hotel owners, lenders, investors and operators. Together, HVS has advised on more than US$10 billion worth of hotel real estate in the region. About the Authors Hadrien Pujol is an Associate Director with HVS s London office. He joined HVS in 2004 and has five years operational experience in the hospitality industry in Europe. Originally from Carcassonne, France, Hadrien holds an MBA from IMHI (Essec Business School France and Cornell University USA) and Diplomas in Hotel Operations from the Lycée Hotelier Savoie Léman, Thonon Les Bains and the Lycée Hotelier Quercy Périgord, Souillac. Hadrien is currently preparing his MSc in Corporate Real Estate Finance and Strategy at Cass Business School in London. Since joining HVS he has advised owners on many hotel and hotel-related investment projects and strategic developments in Europe, the Middle East and Africa. Bernard Forster is a Director with HVS s London office, heading the MENA region. He joined the company in 1997 from Accor Hotels & Resorts where he focussed on property management systems, yield management and guest-history systems in Europe, the Middle East and Africa. Previously, Bernard worked in various operational management roles for the Savoy Group (now Maybourne Group) in London as well as for the Dolder Grand Hotel in Zürich. Bernard holds an MSc in Property Investment from City University, London; a BSc (Hons) in Hotel Management from Oxford Brookes University; and a diploma in Hotel Administration from Institut Hotelier Cesar Ritz, Le Bouveret, Switzerland.