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Dubai leads in hospitality industry; major brands plan to launch about 40 new properties by 2013

By Muzaffar Rizvi

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Published: Sat 28 Apr 2012, 4:05 PM

Last updated: Tue 7 Apr 2015, 11:51 AM

The Gulf hotel industry sees brighter days ahead following a strong recovery in tourism last year, with governments in the region heavily investing in hotel and transport developments to diversify their economies away from oil, boosting revenues from the tourism sector.

The direct contribution of travel and tourism to the UAE’s gross domestic product is expected to hit $19.9 billion this year, or 6.1 per cent, compared to $16.6 billion in 2009.

The UAE is expected to welcome about nine million foreign tourists this year, a growth of nine per cent compared to last year.

The emirate, which has an excellent tourism infrastructure, is investing billions of dollars in airports expansion, cruise terminals, metro-lines, hotels and shopping malls to further strengthen its position on the world tourism map. It has emerged as a preferred, safe and attractive destination in the region after the so-called popular Arab Spring last year and received about 8.2 million tourists in 2011, which gave a “significant” boost to retail business, air travel and hotel occupancy levels in Dubai.

“The UAE is already seeing strong occupancy levels with recent STR Global figures reveal that Dubai had the highest global occupancy rate [86.2 per cent] in January 2012, pushing Hong Kong [79.7 per cent] and Sydney [78.2 per cent] into second and third place,” Alex Kyriakides, president and managing director of Marriott International Middle East and Africa, told Khaleej Times ahead of the annual Arabian Hotel Investment Conference 2012.

Top industry executives and officials are attending the three-day annual conference, which starts today in Dubai.

They will discuss investment opportunities in the region as well as in core Western European markets in the wake of the prolonged eurozone debt crisis.

As Europe’s capital markets dry up and banks are struggling to raise enough cash to cover their own liabilities, its hospitality sector is wide open for investment. Middle East investors have already announced a raft of high-profile hotel acquisitions in Europe, which include Carlton Hotel in Cannes on the French Riviera, Le Royal Monceau — Raffles Paris, The Sanderson St Martins and W Hotel in London, among others.

“The increasing focus on hotel acquisitions is the latest in a series of Gulf-wide investments in European Assets,” said Kevin Wallace, Dutco Group general manager for hospitality investment and development, and president and chief executive of Jebel Ali International Hotels.

Industry leaders expect that hotel investment activity will remain stable across Europe, Middle East and Africa, or Emea, this year. Real estate services company Jones Lang LaSalle Hotels forecasts that global hotel transaction volumes will hold steady this year at $30 billion in which deals worth $11 billion are expected in Emea.

“Hotel revenues in the UAE are growing steadily despite the economic and financial uncertainties in Europe. The GCC governments are cash rich and we see the UAE as a key hotel investment destination,” Chiheb Ben-Mahmoud, executive vice-president and head of hotel advisory, Middle East and Africa at Jones Lang LaSalle Hotels, said in a recent statement.

Dubai leads the industry

Major international brands are due to launch new properties in Dubai during the next two years to further strengthen their position in one of the top competitive markets in the world. As many as 27 new hotels are expected to open in Dubai this year, with another 12 on tap for 2013.

Marriott International is confident to open the world’s tallest hotel at 1,164 feet, or 355 metres, on Shaikh Zayed Road as per schedule in the fourth quarter this year. Hilton Worldwide, InterContinental Hotels Group, Starwood Hotel and Resorts Worldwide, among others, are also set to launch their properties in the emirate in 2012 and 2013.

The emirate, which depends a lot on tourism and hospitality, has more than 300 existing hotels comprising over 62,000 rooms in the market. The hotels in Dubai noted marked improvement in business as strong demand growth boosts occupancy levels and average daily rate in the emirate last year. The hospitality industry will further gain momentum this year as more tourists are expected to visit the emirate.

“With unrest particularly in Egypt and North Africa last year, the UAE experienced an influx of tourism, boosting its status as a regional safe haven,” said Mark Walsh, portfolio director at Reed Travel Exhibitions.

According to a recent report by STR Global, the UAE is leading the region in development projects with 21,238 rooms under development and tourism initiatives underway across all emirates including Sharjah, Ajman, Fujairah and Ras Al Khaimah.

Despite a large increase in the number of available rooms, Dubai was the sole tourist destination in the region that has shown a rise in both occupancy and revenue per available room in 2011, with increases of four per cent and 4.5 per cent, respectively, according to a recent report by Ernst & Young.

“Dubai became a market leader with hotels recording the highest occupancy levels of 78 per cent last year while hotels in Abu Dhabi recorded 75 per cent occupancy,” it said.

STR Global, the leading provider of market data to the hotel industry, echoed the same views in its 2011 year-end report: “Robust demand growth helped to boost occupancy and average daily rate in Dubai last year. The occupancy rose by seven per cent while average daily rate up 3.4 per cent in the emirate last year.”

Hotel executives optimistic

Senior executives and officials at Dubai hotels are optimistic about the turnaround in the hospitality industry this year and said 2012 seems to be very promising. In a survey conducted by Khaleej Times, they said the Dubai tourism industry has been posting stellar performances over the years and hospitality will perform better in 2012.

Frank Owens, group general manager and business development director at Emirates Grand Hotel, said 2011 was a recovery year for the industry.

“We will see real signs of growth in 2012. Based on statistics released this year, we are seeing growth because Dubai is now an affordable destination,” Owens told Khaleej Times, adding that the hotel occupancy level was very much promising in 2011 especially in the last quarter of the year, reaching as high as 85 per cent.

Samer Homsi, general manager at Clover Creek Hotel Apartments, also echoed the same views and said 2012 will be better than last year in terms of occupancy. “We are very optimistic about increase in the number of tourists to Dubai this year as the emirate has a great pull value due to the attractions it offers.”

“We have already seen a remarkable increase in the guest occupancy levels, guests’ nights and revenues, compared with corresponding period last year,” he said, adding that the trend is expected to continue in the coming days.

Wael El Behi, executive assistant manager at Ramada Downtown Dubai, said the Dubai tourism industry has been posting stellar performances over the years. “There has been a boost in hotel occupancies and number of tourists to the emirate in 2011 and the destination is aiming higher for 2012.”

“Dubai has now become a more leisure-appealing destination in the global tourism market. The emirate is likely to see a rise in hotel takeovers and there will be an increase in the overall profitability margin in hotels,” Behi said.

Habib Khan, general manager at Arabian Courtyard Hotel & Spa, said that hotels in Dubai recorded a healthy occupancy levels from 70 per cent to 90 per cent in 2011.

“We achieved 82 per cent occupancy last year. The year 2012 started with a ‘Big Bang’ and we are confident to accelerate and achieve better occupancy and specifically healthier revenue per available room this year,” Khan said.

Moussa El Hayek, chief operating officer at Al Bustan Centre & Residence, said 2012 looks very promising as Dubai once again has enhanced its position in the world of tourism as a preferred, safe and attractive destination, which caters to all categories.

“We would like to highlight that many hotels that were slated to open two years back will now be opening their doors in 2012 and this shows that business is expected to increase in the coming years,” Hayek said.

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