Dubai hotel room rates dropped more than 10 per cent in May

Room rates in Dubai continued to fall as demand dropped and more hotels came online during the first half of the year.

In May, the average room rate across four and five-star hotels fell 10.8 per cent compared to the same period last year to US$271.64, according to Hotstats data released on Monday. The fall was attributed to a stronger US dollar compared with other currencies. In April, the drop was 12.8 per cent from a year earlier.

As rooms became affordable, occupancy levels inched up 1.9 percentage points to 83.8 per cent. But it pulled down the revenue per available room, a key industry measure, by 8.7 per cent combined with lower demand for food and beverage.

As of May, Dubai had 366 hotels comprising 74,774 rooms, according to the research company STR Global, up from 355 hotels and 71,870 rooms as of December.

“The trend of more hotel rooms coming into the market is expected to continue, adding pressure to the average daily rate,” said John Podaras, a partner at Hotel Development Resources, a consultancy in Dubai. “Hotels are likely to take defensive positions and some discounting is going on during summer, but there is unlikely to be a price war as occupancy rates are still holding up.”

Apart from the increased supply of hotels, the room rates are also under pressure from a decrease in tourist arrivals from Russia because of the weak rouble, as well as a weak euro, making Dubai’s hotel rooms more expensive for European tourists.

Hoteliers are also reporting the effect of increasing supply.

“The average daily rates are hit by this volume and therefore our rates are a bit challenged,” said Guy Bertaud, the general manager for H Hotel in Dubai. “But with 183 rooms, we are pretty small compared to anyone else on Shaikh Zayed Road; bigger the volume, the more pressure there is on rates.”

Dubai also leads the new hotels pipeline in the Middle East and Africa with 96 properties totalling 36,523 rooms, with a majority expected to open by 2020, according to the German-based research company Tophotelprojects. In the region, 694 hotel projects are under way, accounting for 188,817 rooms.

In 2017 alone, 30 projects are expected to open in Dubai, including Hotel Indigo Dubai The Sustainable City, Mandarin Oriental and Bulgari luxury hotel, said Christine Davidson, the event director of The Hotel Show Dubai trade fair.

The Dubai Pearl development, with six five-star hotels, is expected to launch in 2018, including the city’s first MGM Grand and Bellagio hotels, she said.

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