Dubai hotels to increase city’s supply of rooms by more than 20% over next two years

Source: Khaleej Times
Author: Isaac John

Dubai’s hospitality sector is set for major boom given the number of new hotel rooms in the pipeline in the backdrop of steadily improving occupancy rates, a leading global real estate consultancy said.

With 4,500 additional hotel rooms expected to be completed in 2012, and a total 11,000 units in supply pipeline until 2014, Dubai’s total capacity will witness a big jump from 54,300 rooms currently available, said Jones Lang Lasalle in a report on Dubai’s real estate market.

“The positive upswing in tourism volumes in Dubai has raised confidence levels and following a slowdown witnessed in the last couple of years

The bulk of the major openings in 2012 are scheduled for the second half of the year, post Ramadan. The city has a significant committed supply pipeline over the next two to three years,” JLL said.

“The second quarter of 2012 saw the opening of one major internationally branded hotel, the Melia in Bur Dubai, which marked the entrance of a new operator in the Dubai hospitality market. Approximately 4,500 additional guest rooms are expected to be completed in 2012 with major projects including JW Marriott Marquis (Business Bay), Al Khor Rayhaan (Al Ghurair City), Fairmont The Palm and Conrad Sheikh Zayed Road,” JLL said.

The report said several major established hotels are undertaking renovation programmes to refresh their products in order to match the new supply and cater to increased demand. These include Pullman Deira City Centre Hotel. JLL said the first five months of 2012 have upheld the recovery trend in the Dubai market as the city received around 2.6 million tourists in the first quarter.

The report noted that occupancy rates have increased by four percentage points in the first five months of 2012 over the same period last year, reaching 83 per cent on city-wide basis over the same period in 2011.

“After a period of two years, average rates showed an increase of about seven per cent during the first five months of 2012 as compared to the same period in 2011. The beach hotels have witnessed an improvement exceeding 10 per cent in ADR (average daily rate) levels in January-May 2012,” it said.

In the first five months, as a result of higher occupancies and ADRs, RevPAR (revenue per available room) levels showed a 13 per cent growth to $212 compared to the same 2011 period, JLL said.

STR Global noted in its latest study that occupancy in Dubai hotels rose 8.2 per cent in three months to reach 86.6 per cent while the ADR increased 8.7 per cent to Dh964.86 for the quarter, compared with the same period last year.

Ernst & Young said in its ME Hotel Benchmarking Survey that the occupancy and average room rates of Dubai hotels recorded declines in May, leading to a drop in RevPAR.

Yousef Wahbeh, head of Transaction Real Estate at Ernst & Young for the Middle East and North Africa, said the seasonal impact of the summer on Dubai’s hospitality sector was visible this year.

“Occupancy at Dubai hotels steadily declined to 79 per cent in May from a yearly high of 89 per cent in March.

Dubai hotels have also witnessed a drop in average room rate from $290 in April to $204 in May.

The coupled decrease in occupancy and average room rate has lead to a decline in RevPAR from a yearly high of $249 in April to $161 in May,” Ernst & Young study said.