With ongoing attacks on Iran have come major disruption to
travel and tourism. Here is some initial analysis of the impact.
Note: The conflict in the Middle East is fluid and Hotel
Investment Today will be updating this story as often as possible with news and
analysis from the region.
MIDDLE EAST – Following U.S. and Israeli military strikes in
Iran, the region has seen an escalation of conflict that has paralyzed the
travel and tourism industry with wide-ranging implications.
As of Monday morning, key aviation hubs in Dubai, Abu Dhabi,
Qatar, Israel and elsewhere in the region have suspended commercial operations.
Emirates, Etihad, and Qatar Airways have suspended most flights.
Airspace is closed or heavily restricted over Iran,
Iraq, Israel, Jordan, Qatar, Kuwait, and the UAE.
Tourist and business travelers have been sheltering at
hotels, accounting for most of the occupancy in the region. Other occupancy
comes from media and diplomats. Dubai and Abu Dhabi have thoughtfully issued decrees to
provide free shelter to those stranded by the conflict.
The shutdown has severed major transit routes between
Europe, Africa, and Asia. International carriers like British Airways,
Lufthansa, and Air France have also suspended regional services.
Governments worldwide have issued urgent travel warnings for
the entire Middle East region. The U.S. has released a worldwide alert
urging extreme caution for American travelers.
There have been mass cancellations for hotels across the
region where there are an estimated 532,000 hotel rooms (3,400 hotels) with heavy
branded exposure.
Peachtree Group CEO Greg Friedman wrote on his LinkedIn that
geopolitical shocks usually trigger a flight to safety, which can push Treasury
yields lower at first. “If oil remains elevated, inflation expectations rise
and that puts pressure back on the long end. The result isn’t necessarily
higher rates. It’s more volatility,” he said.
He added that when uncertainty rises, credit spreads widen, lenders tighten,
and transactions slow. “Even if rates drift down, cap rates don’t automatically
follow when risk premiums expand,” Friedman said.
Expect wider bid-ask spreads. Expect more recapitalizations and structured solutions. Volatility persists until uncertainty gets priced. Markets don’t fear bad news…. They fear unknown duration.
Greg Friedman
For hotels, he said higher energy means margin pressure. “Higher airfare and
gasoline influence discretionary travel. Lower-tier and heavily levered assets
tend to feel it first... This isn’t purely a rate story. It’s a liquidity and
volatility story.”
Friedman said to expect more noise. “Expect wider bid-ask spreads. Expect more
recapitalizations and structured solutions. Volatility persists until
uncertainty gets priced. Markets don’t fear bad news…. They fear unknown
duration.”
Commenting on the immediate impact of the regional conflict,
Joseph Fischer of Vision Hospitality & Travel in Tel Aviv told Hotel
Investment Today, “At this point in time the war is on, and the impact of the
war is widespread even beyond the Middle East and the GCC. Travelers from Asia
planning trips to Europe reschedule and some cancel all together.”
Fischer added that not only hotels in the region are
affected., but the cruise industry suffers, as well. “Jebel Ali port in Dubai
is a stop for many cruise companies. The port was targeted and now it is
temporary closed down,” he said.
Looking ahead, Fischer reminded that human memory is short. “In
2025, global travel recovered completely and surpassed the figures of 2019
before the start of the pandemic. I believe that this rather unique trauma will
be short lived,” he said.
Fischer said he believes the Emirates will recover fast
because of the flight connectivity via the big hubs of DXB IN Dubai and the
airport of Abu Dhabi AUH. “Israel Jordan, Qatar, KSA, Bahrain, Oman will take
longer to recover although KSA enjoys a very strong market of Muslim pilgrims
visiting the Kingdom for the UMRAH and Hajj.”