Hotels across the Middle East have continued their winning streak during the first six months of 2005 with revenue per available room (revPAR) increasing 24.5%, according to latest results from the HotelBenchmark Survey by Deloitte. Given the continuing terrorism activities to hit the area, this performance is all the more remarkable.

At 71%, occupancy levels are at an all-time high, and although still improving, the rate of growth has slowed to 2% compared to 15% in 2004. Last year's growth rates were hardly surprising, as occupancy levels in 2003 dropped to 61% due to the Iraq War. Given this high demand, hotels have been able to push up average room rates, which have surged by 22% to reach US$115. At US$82, the resulting revPAR lags behind Europe by US$3 but is an impressive US$26 ahead of hotels in North America.

Only three markets reported a decline in revPAR during the first half of 2005 Jeddah, Beirut and Kuwait. With a 12% fall in revPAR, hotels in Kuwait reported a disappointing performance, with occupancy down 3% and average room rates down 9%. This indicates the market is returning to 'normalised' trading conditions, following the highs of the last two years, since the start of the Iraq War. Kuwait's year-to-June revPAR compared to the same period in 2003 is virtually identical at US$148.

The assassination of Prime Minister Rafiq al-Hariri in February had a severe impact on the Lebanese tourism industry. Tourism arrivals fell 18.5% in March compared to February, as foreign tourists stayed away. Consequently, occupancy has fallen by 34% in the capital, Beirut. Encouragingly, hoteliers have managed to hold average room rates during this challenging time, mitigating the revPAR erosion to just 34%. Like Kuwait, Lebanon has experienced a renaissance during the last two years and despite the difficult conditions, performance is still ahead when compared to the same period in 2003.

It's an altogether different picture for hotels in Doha and Muscat, who were the region's winners during the first half of 2005. Hotels in Doha reported an impressive 76% increase in revPAR fuelled entirely by average room rate growth, as occupancy fell back nearly 2% to 80%. The only other markets to achieve over 80% occupancy were Dubai and Abu Dhabi with 88% and 83% respectively. Both Emirates are now operating at maximum capacity, which is why significant investment is now being made in new hotel development and tourism infrastructure, such as the three Palms - Jumeirah, Deira and Jebel Ali - The World and Dubailand in Dubai and the Emirates Pearl project in Abu Dhabi.

With global travel analysts predicting continued growth in tourism, there appears no reason why the Middle East should not continue on this winning streak. However, two shadows exist on the horizon - significant new hotel supply and workforce availability. How the industry responds to these challenges will determine the future direction of the market.