End of luxury hotels in the region?
Your next trip to Dubai will be easier on your wallet as hotel rates continue to decline across the emirate, falling as much as ten per cent as compared to last year. But hotel projects in the city continue to surge despite lowering prices.
Dubai aims to double the number of hotel and serviced apartments leading to revenue of $10 billion, according to a report by Alpen Capital.
Expo 2020 driving demand
With 25 million visitors set to attend Expo 2020 Dubai, the UAE’s hospitality sector is on a building boom. The UAE is increasingly focusing on affordable hotel accommodation amid softening demand for hotels because of lower consumer spending.
The decline in demand comes as more operators launch four- and five-star hotels in the UAE, leaving the supply of mid-market accommodation scarce in the country.
Millennium & Copthorne announced the opening of ten new hotels across the region in 2017 at Arabian Travel Market (ATM) 2017 on Monday.
Kevork Deldelian, Chief Operating Officer, Middle East & Africa, told AMEinfo: “Increased competition with the opening of several properties in the last few months and pressure on companies’ travel budgets are among the factors driving down average hotel rates across the country.”
Although the UAE is diversifying its product mix, it remains largely concentrated towards higher tier market offerings. Deldelian said: “Even luxury hotels have had to offer competitive rates to meet the surge in demand for reasonably priced accommodation. Lower prices have led to higher occupancy rates. Mid-scale segment is attracting a lot of customers and that is what we need to capitalise on.”
Travel and leisure sector has seen the emergence of new holiday trends. Deldelian noted: “We have observed an increase in short-stay visits and holidaymakers on city breaks.”
As hoteliers jostle for position, they are aiming to stand out from their competitors through disruptive technologies to save time and money, and meet the preferences of millennials.
Deldelian said: “We have introduced the Studio M brand just to cater to the new, younger generation of travellers who have their own, unique set of requirements.”
Speaking about the future of the industry, Deldelian said: “While the UAE continues to add new supply, it also continues to add new leisure attractions, and expanding the market’s range of potential visitors can only help drive hotel demand and profitability.
“Luxury properties may see a dip in profits but the UAE is still a great place for hotel investments. I firmly believe that occupancy rates will not suffer and prices will stabilise as the sector continues to mature.”
Luxury segment is catching up
With Expo 2020 only three years away, dozens of ambitious projects have been announced across the UAE. From airports to cities-within-cities, the country has a masterplan for growth and development, including a pipeline of 160,000 hotel rooms.
Emaar Hospitality Group also unveiled six new hotel projects at ATM on Monday.
Olivier Harnisch, Chief Executive Officer of Emaar Hospitality Group, said: “We have recorded a positive growth year in 2016 and continue to build on the success, with the launch of new properties including Address Boulevard and three Rove Hotels in a span of just nine months, all in Dubai.
“This demonstrates our focus on not only serving the luxury hospitality market of the city but also to create distinctive brand experiences that appeal to the new millennials and next generation of travellers.”
He added: “While we are focused on international markets, we are also growing our footprint in the UAE to meet the burgeoning demand for hotel rooms – in the luxury, upscale and midscale segments.”
Will Dubai hotel rates continue to fall?
Average prices of hotel rooms across Dubai fell nearly ten per cent in March 2017, as an increase in accommodation supply puts pressure on hoteliers, according to the figures released by hotel industry research firm STR.
In March, hotel room supply in Dubai posted a six per cent increase, as more newly completed projects were delivered into the market, putting pressure on operators to offer attractive rates in a bid to keep bookings up.
While more rooms are expected to come on stream, Dubai’s current stock of accommodations is high by global standards. According to travel site Insider Monkey, the emirate has 100,000 hotel rooms available for visiting guests, the ninth highest globally, on par with New York and Chicago.
The latest statistics, however, indicated that Dubai continues to attract a huge volume of guests, especially during major events. According to STR, average occupancy levels in the emirate are still high at 86 per cent, though slightly down by 1.3 per cent compared to a year earlier.
GCC hospitality projects are worth billions
The total value of 1,153 hospitality projects in the GCC exceeded $148 billion in the first quarter of 2017, according to a new report by project research and intelligence provider BNC Network.
The GCC’s hospitality industry constitutes seven per cent of all active projects in the region’s urban construction sector. In dollar terms, hospitality projects account for 13 per cent of the total estimated value of the region’s urban construction sector, the latest BNC Intelligence shows.
The report reflects the growing focus on developing the tourism sector by the governments of Gulf countries, such as Saudi Arabia, UAE, Oman, Qatar, Bahrain and Kuwait, which are gradually trying to diversify their revenue base and reduce dependence on hydrocarbon, according to BNC.
What the future holds
According to Alpen Capital Hospitality Report, the GCC’s hospitality market is expected to grow at a 7.6 per cent CAGR from an estimated $25.4 billion in 2015 to $36.7 billion in 2020.
Despite a challenging period last year and a weak average rate environment in 2017, the market is likely to recover in the long-term, driven by rise in tourist arrivals stemming from upcoming mega events and government efforts.
The GCC region holds one of the largest hotel development pipelines in the world. Driven by the bright prospects of the tourism industry and government support, international hotel chains as well as domestic players have laid down robust hotel and serviced apartment development plans.
Dubai is likely to witness an addition of nearly 57,000 rooms in hotel and serviced apartments in the five years to 2020, whereas Saudi Arabia has a pipeline of over 47,000 rooms.
Large-scale international events, upcoming tourist attractions, and a growing MICE market are likely to accelerate tourist arrivals to the GCC region. International tourist arrivals to the GCC are anticipated to grow by 5.7 per cent annually in the next four years to 2020, Alpen said.