Al Habtoor warns of Dubai hotel oversupply ahead of Expo 2020

Khalaf Al Habtoor has urged banks and tourism chiefs to exercise caution in approving new projects as the city adds thousands of new hotel rooms.

Dubai has introduced a series of measures encouraging investment in mid-range rooms to accommodate the city’s 25 million visitors expected by 2020.

These include shorter approval times for hotel building permits and the granting of land plots to Emirati investors willing to build new three- and four-star hotels.

The market has responded accordingly, with scores of new hospitality projects announced since Dubai won its Expo bid in 2013.

But the chief of one of the region’s biggest conglomerates warned against overbuilding.

“I advise everybody – the banks and the tourism department that they should be careful,” Mr Habtoor said at the Cityscape exhibition in Dubai yesterday.

“They have to have independent international finance companies to do their forecasts and feasibility studies. Without that, they should not approve. The banks shouldn’t give millions to build hotels. That is dangerous, because we want to protect the name of Dubai from somebody going into bankruptcy,” he said.

“We hold the banks responsible and the tourism [department] responsible. They should not approve formation for a hotel without a feasibility study by a big international company.”

According to JLL, Dubai has a stock of 65,000 hotel rooms. Estimates of the amount of new rooms required by the city vary between 30,000 and more than 65,000.

Faisal Durrani, global research manager for consultancy Cluttons, argued that there is plenty of potential for Dubai’s hotel market even beyond 2020.

“Hotel occupancy is still 80 per cent and there are still 12 million to 13 million people coming in every year. To hit that 20 million target you need a whole lot more hotels and you need a whole lot more tourism-supporting infrastructure,” he said.

“If you have London, where you have something like 130,000 hotel rooms and about 18 million tourists per year … if you look at the ratios, Dubai is still behind in those terms.”

The Government-owned developer Wasl Asset Management has said it is planning to double its stock of hotels by 2020, adding 14 new hotels that will contain up to 5,000 rooms. Most of these are three- and four-star properties, although it is bringing in a Mandarin Oriental and an Elements by Starwood brand.

Millennium & Copthorne and Deyaar said yesterday that they would jointly develop and manage 1,000 rooms in new hotels across the country.

Dubai’s Department of Tourism and Commerce Marketing was not immediately available for comment.

Mr Al Habtoor’s own group is putting the finishing touches to three Starwood hotels – a W Hotel, a Westin and a St Regis – at his $3bn Al Habtoor City project overlooking Sheikh Zayed Road in Business Bay.

The three hotels are expected to be open by the end of the year, he said.

A circular theatre venue designed by the Cirque du Soleil creator Franco Dragone is set to complete by June next year, while a cluster of three residential towers, two of which are 75 storeys high, should be completed by the end of next year.

Mr Al Habtoor said the combination of uses at the site is unique.

“You will not find this project in London, Paris, New York or Berlin. If you find such quality and variety, I will give you the air ticket,” he said.

He also said that despite the softer market for luxury residential properties in Dubai, he is confident of being able to sell his units at the rate his firm has set.

“I don’t think any location compares to ours. If we want to sell, we dictate our price. We either sell at our price, or we don’t sell. We are not coming here hungry.”

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