Hotel Chains’ Middle East Recovery Stalls
Global hotel groups face a slowing Middle East recovery in the fourth quarter as regional conflicts and attacks weigh on demand.
Stock photo for illustration only, not from the actual event
- Major hotel groups expect Q4 to weaken despite a Q3 recovery.
- Accor has the highest regional exposure with about 11% of global room revenue.
- Development pipelines remain steady with no project cancellations reported.
- Owned and managed hotel earnings take a hit from regional uncertainties.
Global hotel giants are facing fresh headwinds in the Middle East as the expected peak season recovery shows signs of stalling. Although major hospitality groups reported a rebound in their Middle East operations during the third quarter following the sharp downturn triggered by the U.S.-Iran conflict, most companies now guide for renewed weakness in the fourth quarter, which traditionally serves as the region's most important travel period.
The ongoing uncertainty is heavily driven by security challenges, including Houthi attacks in Saudi Arabia, which have prolonged travel disruptions and led to a wave of event cancellations across the area, subsequently dampening consumer demand and booking momentum.
Among major operators, France-headquartered Accor maintains the highest exposure to the region, with the Middle East accounting for approximately 11% of its global room revenue—about 5% coming from Saudi Arabia and roughly 4% from the United Arab Emirates. During an October 22 earnings call, Group CFO Martine Gerow reported that Accor's Middle East RevPAR fell by 3% in the third quarter.
Meanwhile, Marriott experienced a 12% RevPAR drop in the Middle East for the third quarter, representing an improvement from a decline exceeding 40% in the second quarter, though the company anticipates a steeper drop in Q4 against tough comparisons. Hilton reported a 5.6% decrease in Middle East and Africa RevPAR, expecting a low double-digit full-year decline for the region.
"Saudi and Egypt continued to perform well, and the UAE RevPAR improved materially from the second quarter."
Martine Gerow, Group CFO, Accor
Financial impacts are also weighing on bottom lines. Hilton CEO Chris Nassetta stated that the company's owned hotels in the region will trim more than $20 million from earnings this year, while Hyatt anticipates a reduction of about $10 million in full-year fees.
Context and Analysis: This situation highlights the delicate balance international hospitality brands must maintain when operating in geopolitically sensitive regions. While short-term RevPAR and earnings are vulnerable to regional conflicts and safety concerns, major chains continue to protect their long-term development pipelines, indicating strong confidence in the region's multi-year tourism expansion and government-backed infrastructure investments.
Despite near-term earnings pressure, development pipelines are holding firm. IHG reported that it is not aware of any project cancellations in the region, and Wyndham recently secured five new contracts spanning Saudi Arabia and the United Arab Emirates.
Source: Skift
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