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Dubai offers the best of both worlds: it’s the third largest market for luxury hotels in the world and its status as an international business hub makes filling rooms relatively easy when compared to the regional competition.
Dubai is the best performing hotel market in the Middle East and North Africa region and is certainly the one to watch in 2013, according to Jones Lang LaSalle’s latest Hotel Investor Sentiment Survey.
Since 2009, Dubai hotels have reported a strong recovery in occupancy and average daily rate, or ADR, levels. “In light of a slowing development pipeline and political stability in the country, investors believe that Dubai’s operating fundamentals will continue to improve in the short and medium term. Dubai is the best performing Mena hotel market and is certainly the one to watch in 2013,” said Gabriel Matar, regional director Middle East and Africa Jones Lang LaSalle Hotels.
STR Global, another global hotel industry consultancy, has predicted that Dubai’s hospitality industry would see a double-digit growth in capacity in 2013 as the Middle East and Africa region prepares to add 150 new hotels this year.
STR Global Construction Pipeline Report for the region said Dubai would see 28.6 per cent growth in hotel room capacity with 17,409 rooms in the construction pipeline. Hotel construction markets in Saudi Arabia and Oman are also forecast to see strong double-digit growth.
There will be acceleration in new hotel builds in the region in 2013 compared to 2012, STR forecast said. It said year-to-date, 46 hotels opened in the region adding 10,510 rooms.
Jones Lang Lasalle said in a recent report that Dubai’s total capacity will witness a big jump from 54,300 rooms currently available with 4,500 additional hotel rooms expected to be completed in 2012, and a total 11,000 units in supply pipeline until 2014.
Demand for luxury assets is highest in Dubai, Abu Dhabi and the French Riviera, the latest JLL Investor Sentiment Survey said.
Alpen Capital said in its GCC hospitality industry report that while tourist arrivals in the UAE are likely to grow at a compound annual growth rate of 5.3 per cent between 2012 and 2022, hotel supply is expected to increase at 5.3 per cent from 96,992 hotels in Dubai and Abu Dhabi to 125,383 hotels in 2016.
“In the Middle East and Africa, trading performance expectations have improved significantly since the last hotel investment survey although the outlook still remains slightly negative for the short and medium term. The improvement in sentiment is largely due to an overall stabilisation in the region since the Arab Spring and tourist flows have started to return to countries such as Egypt and Tunisia.”
Yield requirements remain higher in Mena. Dubai yield expectations are at 10 per cent, Matar said. “When it comes to the most sought after asset type in Europe, Middle East and Africa, or EMEA, results show that 28.8 per cent of respondents indicated their interest in targeting upscale properties for investments, with the sentiment in this asset class rising significantly,” he said.
Survey results indicate that confidence in hotel real estate is holding up well despite the economic problems in Europe. Cap rate requirements remain firm at an average of 7.2 per cent, with keener yields for key gateway markets such as Paris, London and in key German cities where aggressive bidding has driven prices to peak levels,” said Matar.
(c)2013 the Khaleej Times (Dubai, United Arab Emirates). Distributed by MCT Information Services.