Why 67% of hotels in the Middle East are delayed

Global real estate and construction consultancy Drees & Sommer has revealed that over 67% of new hotel openings are delayed due to poor communication, contractor time pressures and delayed sub-contractor activities. 

With Dubai aiming to attract 20 million visitors in 2020 and overnight visitors to the Middle East exceeding 64 million in 2018, the opportunities to maximise profits have never been greater for the hotel industry.

The findings of the research paper, Hotel Pre-opening: A tactical approach, have revealed that there are three main causes for delay in the handover from a contractor to a hotel owner, namely: lack of communication between project stakeholders, contractor time pressure and delayed deliverables from third-party contractors.

“A significant impact on the hotels’ return on investment”

Drees & Sommer’s managing director of global hospitality, Filippo Sona, said: “Our extensive research has shown that handover delays not only have a significant impact on the hotels’ return on investment, but they also affect the expected profitability of the first year of operations.

“To minimise the impact, we have identified seven key tactical pillars to help reduce the potential losses including project stakeholder alignment, value procurement approach, technical building delivery, realistic opening date and asset performance strategy.”

The research also highlights the main challenges and proposes solutions for each of the seven pillars, resulting in savings in five categories, including furniture, fixture and equipment expenditure, hotel recruitment phasing, operating supplies and equipment expenditure, advertising, promotions and hotel organisation structure.

“The role of the asset manager is a complex one”

Sona added: “The role of the asset manager is a complex one, not only do they have to achieve the owner’s objectives by managing the investment, but they also have to resolve any misalignment between the parties, including the project manager, operator, and the owner in order to boost overall asset potential. This is critical in the pre-opening phase, which typically lasts between six and nine months.

“Other important factors to consider are setting-up pre-snag schedules, benchmarking the pre-opening budget against similar properties and incorporating regular meetings and visits to determine a more pertinent opening date in the event of a delay.

Ultimately, anticipating the right actions to create a sustainable competitive advantage are key.”