Hotel room rates fall in Dubai as inventory builds up

Rising inventory has weighed on Dubai’s room rates for a third consecutive month this year even as developers and hotel operators show no let-up in new announcements ahead of Expo 2020.

In March, average room rates across four and five-star properties in Dubai fell by 5.5 per cent to touch $380.85 year-on-year, according to data from HotStats. Occupancy levels stayed stable at 88.8 per cent.

Hotels in Abu Dhabi fared comparatively better, recording a 6.5 per cent year-on-year growth in room rates to $167.62 and an average occupancy level of 83.9 per cent, an increase of 1.3 percentage points on the same period last year.

The release of the data comes ahead of the start of Arabian Travel Mart (ATM) in Dubai today, one of the largest travel trade fairs, with organisers and hoteliers sounding upbeat but analysts a bit more cautious.

Last year, ATM attracted more than 23,500 visitors, an increase of 12 per cent over the previous year’s numbers. It also reported 2,700 exhibitors. This year the organisers are expecting similar numbers, with 113 new exhibitors, according to Nadege Noblet, the exhibition manager of ATM.

“As the numbers are growing we had to add an extra hall, besides medical tourism and cruise pavilions are growing this year,” she said.

Many of the exhibitors, which include international and local hotel developers, will also talk about the market at the three-day Arabian Hotel Investment Conference, which starts tomorrow and is geared towards networking and deal-making. Dubai’s Expo 2020 and Qatar’s Fifa World Cup 2022 are fuelling much of the optimism.

Dubai’s 20 million tourist target, however, depends much on the delivery of the Dubai Parks and Resorts theme parks, according to a Colliers analyst.

Dubai Parks and Resorts, which is building three contiguous entertainment zones with a resort and retail offerings, is expected to open in phases from next year. Legoland, one of the theme parks, alone expects to sell 6.7 million tickets during 2017.

“Much of Dubai’s 2020 vision depends on Dubai Parks being able to deliver the theme parks, if not Dubai might have to revise its 2020 target down to 15 million to 17 million tourists besides witnessing a slowdown in the retail and hospitality market,” said Filippo Sona, the director of hotels for the Middle East and North Africa region at Colliers International, the property services company.

He was discussing hospitality and tourism issues ahead of the 22nd edition of the four-day ATM at a roundtable last week.

Dubai Parks and Resorts raised Dh2.5 billion in an initial public offering in December for its $2.9bn amusement park complex. While some of the money is in place, the delivery also depends on the readiness of the infrastructure and maro-economic conditions.

The parks are being built on greenfield sites and therefore the infrastructure, with the exception of Sheikh Zayed Road, is being implemented as part of the overall project development, including the extension of the Metro Red Line, development of the junction on Sheikh Zayed Road, the development and expansion at Dubai World Central airport and supply of utilities, said John Podaras, an analyst with the consultancy Hotel Development Resources in Dubai.

“Dubai’s performance is being affected by a number of factors, such as the reopening of the Egyptian market, which is diverting a portion of the low end of the market, and the economic difficulties in the Russian market,” he said. “Last year saw a number of hotel rooms enter the market which had an effect on 2014 and this year’s performance and clearly further additions to supply will add to that impact.”

Operators and developers are announcing projects for delivery before 2020, across luxury hotels to budget brands.

Dubai-based Millennium and Copthorne Hotels is expected to open three hotels in Abu Dhabi over the next three years, bringing another 1,300 rooms across a range of offerings from the 677-room Bab Al Qasr near Emirates Palace, a 280-room Biltmore Hotel with 50 villas, and 300 serviced apartments on Reem Island.

“The government of Dubai is making it very attractive to build these three and four-star offerings,” said Ali Hamad Lakhraim Alzaabi, the president and chief executive of Millenium Copthorne Hotels and Resorts Middle East and North Africa. “We will be building nine hotels across the city. The first will be next to Dubai World Central, then Dubai Investment Park and Al Barsha and the other locations are still in the planning stages.”

Ajman-based R Hotels has signed a deal with Accor to open a 191-room Ibis Styles hotel on Al Mina Road in Jumeirah in the second half of the year. It will target both leisure and business travellers. The group owns and manages four properties in the UAE.

Citymax Hotels, which operates budget hotels, started construction of its second Al Barsha property besides a Business Bay hotel.

Auris hotels, also based in Dubai, will open four hotels and hotel apartments with 1,472 rooms this year in Tecom, Jumeirah Village Triangle and Dubai Sports City.

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