Dubai, Makkah lead Middle East in new hotel room supply

dubai - Dubai is seeing increasing demand for good value-for-money hotels in the mid-market sector

Hotel construction activity in the Middle East continues to gain momentum despite a slowdown in the hospitality industry across the region with Dubai and Makkah driving the building boom, new data released on Sunday shows.

While Dubai has 20,451 rooms in 69 hotel projects under construction, Makkah has 23,060 rooms in 14 hotel projects underway, STR's December 2016 Pipeline Report said.

Overall, the Middle East region has under contract 158,441 rooms in 555 projects while Africa has 57,626 rooms in 309 projects.
Under contract data includes projects in the "in construction, final planning and planning stages" but does not include projects in the unconfirmed stage.

Richard Stolz, head of corporate development at grmc Advisory Services, said creating a bigger supply of good value-for-money hotels apart from the existing five-star premium market enhances Dubai's aim to extend the average length of stay per hotel guest from the current 3.6 nights per visit.

"Going forward, having the additional supply of new hotels in mind, Dubai needs to pay attention to manage and monitor hotel supply and demand effectively. In this regard, an important trend is the increasing demand for good value-for-money hospitality in the mid-market sector," said Stolz.

The "under contract" total in the Middle East represents a 7.2 per cent increase in rooms compared with December 2015. Specifically in the "in construction" phase, the Middle East reported 84,519 rooms in 264 hotels. Based on number of rooms, that is a 4.3 per cent increase in year-over-year comparisons.

The "under contract" total in Africa represents a 5.1 per cent decrease in rooms compared with December 2015. In the "in construction" phase, Africa reported 29,546 rooms in 160 hotels. Based on number of rooms, that is a 6.3 per cent increase in year-over-year comparisons.
Dubai's vibrant hospitality sector, which surpassed the 100,000th room milestone with the opening of The Westin Dubai, Al Habtoor City in 2016, is on track to see a further surge, with the overall room supply set to hit 134,000 by the end of 2018, according to latest available data.
Dubai expects occupied room nights in hotels and hotel apartments to reach 35.9 million, representing a 10.8 per cent compound annual growth rate from the end of 2015 to the end of 2018. "As such, the overall room supply is expected to reflect similar growth, reaching 134,000 rooms by the end of 2018," STR said in a statement.

Industry experts expect overall projected occupancy rates to be maintained at a strong 77 per cent until 2018 on the back of rising demand as Dubai, which has set a target of hitting 20 million visitors by 2020.

"Already, we are seeing an upswing in tourist arrivals from some of the former Soviet republics and Russia. We expect that in the run-up to Expo 2020, Dubai will see a big surge in holidaymakers from across the world on the back of newer tourism assets, ranging from theme parks and cultural districts to specialised event venues and entertainment offerings," a leading hotelier said.

A recent MasterCard Global Destination Cities Index report had ranked Dubai as the fourth most-visited city in the world as well as the number one city for international overnight visitor spend.

According to investment bank Alpen Capital, the UAE room count from hotels and hotel apartments would rise by 8.3 per cent until 2020 to touch 191,260, up from 150,393 this year. Of these, about 57,000 rooms are expected to come onstream in Dubai in the next five years.

Hospitality revenue in the UAE is forecast to increase by 10.8 per cent annually from last year to $9.8 billion by 2020, despite concerns over a slowdown this year in foreign visitor spending.

- issacjohn@khaleejtimes.com