(MENAFN- ProactiveInvestors - UK) Not all hotels in the Gulf States are five star giants and not everyone wants to pay the prices they charge.
This has ensured there's a growing market for business-focused, mid-tier properties; a hole that is being admirably filled by AIM-listedAction Hotels PLC (LON:AHCG).
The market is certainly opening up for Action.
The company has enjoyed a strong year so far. It told investors it expects first half results to match market expectations after a strong 'operational performance' in the six months to the end of June.
Its top-performing hotels in both Australia and the Middle East achieved occupancy rates of greater than 90%, impressive numbers for any hotel.
Action's newest and largest hotel, the ibis Styles in Brisbane, has also shown 'encouraging early trading figures' the company said.
The firm isn't stopping there though. Action is looking to take advantage of a sector it considers to be under-explored, and will have nearly 3,200 rooms once the latest pipeline of developments is finished.
The background
Established in 2005, Action is recognised as one of the pioneers of the branded three and four star hotel market in the Middle East. There is also a growing presence in Australia.
In February, Action Hotels acquired a plot of land located within Dubai's Media City, due to open in 2017.
It is situated less than 1km from the coast and is surrounded solely by five star hotels, with only one other mid-market hotel in the vicinity. It is the company's second hotel in Dubai, but is typical of the strategy for its Middle East expansion.
In July, the company announced it would develop a new Novotel-branded mid-market hotel in Dubai Healthcare City to target leisure, medical tourism and business travellers.
The hotel is Action's first to be Novotel-branded, though it has worked extensively with its French ownerAccorbefore.
Action Hotels' sites are mostly located within the Gulf Co-operation Council - the economic union of the Arab states - as branded mid-scale hotels are significantly under-supplied in this region compared with Europe and the US.
With prime credit ratings and stable economic outlooks, underpinned by strong economic and tourism growth, the GCC is forecast to be among the world's fastest growing regional economies.
Governments in the area are also increasingly focused on promoting tourism, supported by an increase in travellers from member states and demand for more affordable hotel accommodation for both business and leisure.
In 2014, Dubai Airport overtook Heathrow as the world's busiest airport.
Action currently operates eleven completed properties offering more than 2,000 guest rooms.
It has ambitions to grow the portfolio to 17 hotels providing just under 3,000 rooms by 2017. The target is 5,000 rooms by 2020.
The model sees it operate sites for well-known brands such as ibis, ibis Budget, Mercure, Holiday Inn, Staybridge Suites, Premier Inn and Tulip.
Australia
It also has a growing presence in Australia, operating two hotels in Melbourne with a third in the pipeline in Brisbane, though this is seen as a strategic hedge to the Middle East operation.
And the numbers are starting to stack up at the Australian hotels, too.
Action delivered an impressive occupancy rate of 91% at its recently-acquired ibis Budget Melbourne Airport, while Action's newest and largest hotel has shown 'encouraging early trading figures'.
Occupancy there was over 51% in just its third month since opening, a pretty good return for a new hotel.
This goes some way to explaining why the company prefers to work with the big names of the hotel industry rather than operate its own brands.
Chief executive Alain Debare said: 'We appreciate the operational expertise they bring to the table and more importantly the marketing muscle they are able to bring, which accounts for about 40% of the bookings.'
Regional diversification
Governments in the region are diversifying away from oil and gas, meaning more jobs are being made available in different areas.
This is good news for Action, as businesses look to reduce costs such as travel budgets; the group offers corporate travellers a three-star no frills alternative.
This alternative may become the norm in the not-too-distant future. Its Kuwaiti operations were its top performers in the first half of 2016.
Founded by a member of the Kuwaiti ruling family, Action Hotels has a solid grounding in its Middle Eastern market that it uses to its full advantage.
"To get into the Middle East you have to partner up with owners; to own property you have to be a GCC national,' explained Katie Shelton, Action's head of corporate affairs.
'If you want to run a business a GCC national has to own 51% of that, so there are massive barriers to entry for any international company buying land and setting up businesses.'
Future Development
Action Hotels wants to expand through long term operating leases, where appropriate, which require less capital expenditure.
Because it is focused on business travellers, it is usually not affected by global instability or economic turbulence.
'Businesses become increasingly cost conscious and are looking for affordable quality mid-scale hotels which offer better value for money for their employees,' it said.
And finally, the share price…
The company's share price has remained fairly stable at around 55p in the year so far, valuing the company at approximately £80mln.
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