Dubai mid-market hotels are coping better with falling room rates than their upmarket rivals, new research shows.
The emirate is shifting towards the development of more mid-market hotels as the profile of visitors changes, according to the property consultancy Knight Frank.
Its latest Dubai Hospitality Report covering the first half of this year said there were a number of driving forces behind the demand for mid-market properties, including a growing middle class from countries in the GCC, China, India and Africa, and a younger profile of guests with more limited disposable income.
“As a result, strong demand for branded, mid-market hotels has helped to support average occupancy levels, which are above market-wide averages.”
The revenue per available room at mid-market hotels increased by 0.5 per cent in the 12 months to the end of the first quarter, compared to a market-wide decline of 7 per cent.
This was blamed on currency fluctuations that made Dubai more expensive for visitors from a number of countries, especially Russia.
On the supply side, the shift towards mid-market hotels is partly because prime sites for luxury hotels are becoming more scarce.
There have also been initiatives launched by Dubai’s government to encourage investment in mid-market hotels in the run-up to Expo 2020.
These have included the allocation of government land to three and four-star hotel projects and the waiving of a 10 per cent municipality tax on each room for four years. The approval process for construction permits was also cut to no more than two months.
Knight Frank argued that investors have several advantages when investing in mid-market properties. They are cheaper and quicker to build and need fewer staff once opened. They also tend to be less cyclical in terms of the income they generate.
Dubai needs more affordable rooms if it is to grow tourism numbers from the 13.2 million visits last year to an anticipated 20 million by 2020.
Research published by Bloomberg last week found that Dubai was the fourth-most expensive city in the world for hotel stays, despite a 6.4 per cent decline in prices over the past 12 months to US$255 per room, per night. A higher-than-average proportion of five-star rooms meant its average rates were higher than Hong Kong ($236 per night), London ($227) and New York ($202).
Only San Francisco ($397), Geneva ($292) and Milan ($271) were more expensive.
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