PREPARED BY HAMMAD ULLAH KHAN

Management Executive Research | Advisory

KARACHI HOTEL

MARKET OVERVIEW

2014 A STUDY OF HOTEL MARKET TRENDS

KARACHI HOTEL MARKET OVERVIEW 2014

1

-

5,000

10,000

15,000

20,000

61 72 81 98 2015(P)

Source: Pakistan Bureau of Statistics &

Urban Resource Study Karachi

Karachi Population Trend Figures in (000)'s

34%

45%

21%

Pakistan Sector Wise Employment

Services

Agriculture

Manufacturing

KARACHI CITY

Karachi is the largest city of Pakistan and provincial capital of Sindh. It is

one of the fastest growing city in terms of population. Karachi is spread

over area of 3,527 Square kilometers .The city has dedicated areas for

industrial zones, business districts, shipping, commercial and whole

sale markets. Sharah-e-Faisal a 19 Kilometers long road serves as

principal arterial road ,while two major highways : National Highway

which runs on the north eastern side of city and Super highway which

runs from south eastern side of the city provide logistic access to and

from inner part of Sindh.

DEMOGRAPHY

Karachi is the world's 7th largest metropolis with an estimated

population of nearly 18 Million. The major portion of demographics

formation comprises of immigrants’ influx. The housing development

pattern of the city is divided into formal and informal settlements major

portion of Karachi population lives in informal settlements. The

population growth rate is about 5% per annum.

ECONOMY

Karachi is the major economic and financial hub of the country .The

city accounts for 42 % of country wide revenues, and contributes 30 %

of country wide manufacturing output and about 20 % to overall GDP.

Karachi is the home of diverse range of Multi-nationals & National head

offices ranging from large scale production to financial services. The city

has two sea ports namely Karachi Port and Port Qasim, both handle 85

% of cargo traffic. The economy of Karachi heavily relies upon its

industrial base and financial sector. The stock Exchange of Karachi is the

largest stock exchange of the country.

KARACHI HOTEL MARKET OVERVIEW 2014

2

92.3%

7.70%

Travel & Tourism Industry Revenue Generation

Domestic

Foreign

83.20%

16.80%

Travel & Tourism Revenue Generation

by Traveler Type

Leisure

Business

855 907 1161

966

0

500

1000

1500

2009 2010 2011 2012

Source: World Bank Database

Foreigners Arrival In Pakistan Figures in (000)'S

Karachi Hotel Market Overview & SUPPLY

Hotel Market in Karachi had widely been affected by worsening security

situation over all the country and within Karachi. The terrorist attacks

on Islamabad Marriot Hotel acted as a turning point which affected the

hotel industry occupancy ratio, average daily rate(ADR) and revenue per

room available (RevPAR). In the period of 2008-2009 the major hotels

had to reduce daily room rate (ADR) up to 5,000 PKRS.

The deteriorating law and order condition and increasing numbers of

terrorist attacks were restraining both the foreign and domestic

clientele to travel to or within Pakistan. Due to increasing security

concerns major hotels were compelled to increase the overall security

setup and staff which increased the operational costs. New expected

entrant such as Sofitel by Accor abandoned the market due to volatile

security conditions and falling occupancy rates in 2011. According to

sources by 2011 Occupancy ratio had fallen to 20-30 % .Sheraton one

of the major hotels in Karachi shut down the operations in 2013 and has

been taken over by Swiss based operator Moven Pick.

DEMAND

Despite turbulent security conditions, lower occupancy ratio and

declining tourism, the hotel market in Karachi has shown resilience. The

major hotels were able to attract demand from corporate sector:

meetings, conferences and seminars by national and international firms

which helped the industry to remain afloat. The Government

liberalization policies in the oil & exploration sector and increased

Major Hotels Existing Room Supply

Marriot 219

Pearl Continental 250

Avari 214

Moven Pick 407

Ramada 170

KARACHI HOTEL MARKET OVERVIEW 2014

3

76%

65%

63%

68%

0% 20% 40% 60% 80%

Ramada

PC

Avari

Marriot

Occupancy Ratio 2013 (Karachi)

efforts to overcome power outages as well as foreign NGO such as

USAID projects have improved inflow of both foreign and inter-regional

travelers to Karachi. In addition to that airline business has provided

steady revenues to hotels.

OUTLOOK The hotel market in Karachi has shown slight improving trends after

general elections and overall security situation has also been improved

due to intensive targeted operation in critical areas of city, but still

travellers both foreign and domestic are reluctant to travel to Karachi.

Some hotel industry resources suggested that city wide occupancy has

shown signs of Improvement currently reaching up to 60 %. In addition

to that ADR has also shown improvement trends currently standing at

about PKRS 7,000-7,500 for major city wide hotels.

It is expected that Karachi hotel market would continue to recover as

city wide security situation is improving, moreover number of

international traveler would increase as Pakistan has won GSP Plus

status for which Germany would extend complete support in relation to

providing extensive training to improve quality and quantity of exports.

Furthermore, it is expected that Karachi hotel industry would be

recovering as Karachi is the core financial city of Pakistan.