Source : AMEinfo
While the UAE has been busy building its hospitality sector, it seems demand may not be keeping up. The UAE clearly acknowledges hospitality as a core strategy to attract both tourism and business travelers to the Emirates, but are Dubai and Abu Dhabi feeling the strain of oversupply, especially with the recent influx of mid-scale hotels opening their doors.
Is it simply a case of too many rooms, instead of too little demand? That’s the question Jones Lang LaSalle (JLL) asked in its Q3 report on the UAE hospitality market. In short, too many rooms are affecting the revenue per available room (RevPAR).
“The coming few years will see a number of mid-scale hotels open, which will lead to the diversification of the hotel market and will result in the city becoming a more attractive place to visit to a broader range of visitors. However, it is also likely to result in further declines in average financial returns going forward,” JLL reports.
“A further 1,800 keys were added to the market in Q3, bringing the total stock of quality hotel rooms in Dubai to almost 82,200 keys, primarily focused on four- and five-star properties.”
The real estate research company said that apartment refurbishments added 1,539 keys to the market in Q3. It said that August RevPAR at AED503 was the lowest level seen in the last decade.
JLL said that Abu Dhabi’s hospitality market registered an eight per cent drop in Average Daily Rates (ADRs) to reach approximately $111 and a two per cent drop in occupancy levels to 68 per cent, compared to the same period last year. RevPAR declined 11 per cent to reach $76.
While 700 keys are expected to be delivered by the end of 2017, there were no major completions in Q3, with the total room supply remaining at 21,200 rooms.
Deloitte’s recent Middle East Real Estate Predictions report stated that increased competition between operators had driven a reduction in ADR in 2016, with a market-wide average fall of 11.5 per cent between November 2015 and November 2016. A total of approximately 16,600 keys were under execution and due for delivery by 2020, with 23 per cent of these in the mid-market sectors.
“Dubai’s hospitality market will continue to face challenges in 2017, including slowing economic growth in key source markets and a strong local currency, making Dubai a more expensive destination for many visitors. Despite this, Dubai is likely to maintain its position as one of the world’s top tourism markets in 2017, both in terms of visitor numbers and hospitality performance metrics.”
“We predict that market wide hotel occupancy in Dubai in 2017 will be approximately 75 per cent, still among the highest in the world.”
It mentioned that strong infrastructure spending in tourism, such as Expo2020, the Dubai Water Canal, Dubai Parks and Resorts and IMG Worlds of Adventure, would support these expectations.
“Between 2017 and 2020, we predict that 23 per cent (4,000) of hotel rooms developed in Dubai will be in the mid-market sectors, as developers look to capitalise on this market which has been undersupplied historically.”
A promising Q4 in Abu Dhabi
Despite the decline in RevPAR and occupancy, according to the Abu Dhabi Tourism & Culture Authority, Abu Dhabi welcomed more than 420,000 hotel guests in August 2017, representing 13 per cent growth compared to the same month last year. It said that the lifting of visa restrictions for Chinese travellers contributed to the rise in hotel guests, with the Chinese now being Abu Dhabi’s largest overseas source market, heading India and the UK.
JLL said that Q4 was traditionally a strong period for the Abu Dhabi hotel market and that the November Louvre opening, together with the Abu Dhabi Grand Prix would be rewarding to many hotels in these events’ vicinity.