Average room rates drop in Dubai, Abu Dhabi: EY

Average room rates drop in Dubai, Abu Dhabi: EY

Abu Dhabi - Yousef Wahbah, Mena head of transaction real estate at EY said that the hospitality markets across Mena witnessed a less than ideal performance in 2015 when compared to previous year.

By Haseeb Haider

Published: Wed 24 Feb 2016, 11:00 PM

Last updated: Fri 26 Feb 2016, 7:51 AM

Abu Dhabi and Dubai's hotels saw a drop in revenue per available room or RevPAR in January 2016.
Abu Dhabi's emerging market which has 151 properties witnessed a drop of 15  per cent year-on-year, while Dubai revenues fell 9.3 per cent in January when compared with the same month a year ago.
"Hotels in Abu Dhabi and Dubai noticed a drop in KPI's due to several factors such as additional room supply, general macro-economic conditions coupled with the drop in the Euro making it more expensive for travelers from Europe and reduced visitation from Russia due to the significant devaluation of their local currency to the lowest level ever," said Ernest & Young in its latest Middle East hotel benchmark survey.
Yousef Wahbah, Mena head of transaction real estate at EY said that the hospitality markets across Mena witnessed a less than ideal performance in 2015 when compared to previous year.
While occupancy rates surged across some markets in 2015 such as Cairo,  holy city of Madinah, Muscat and Ras Al Khaimah, revenue per available room across most Mena markets was lower compared to 2014.
Dubai beach hotels and Jeddah hotels had the highest room yields in Mena, recording an average of $311 and $214 respectively in 2015.
Despite the decrease in revenue per available room, markets such as Dubai, Abu Dhabi and Ras Al Khaimah, which saw an influx of new international hotel chains in 2015, recorded very impressive performance indicators.
Dubai and Abu Dhabi maintained the highest occupancy rates in the region in 2015 at 80 per cent, followed closely by Ras Al Khaimah at 75 per cent, competing with the high occupancy rates of cities such as London, New York and Tokyo. The demand for Dubai beach hotels has always outstripped supply and it is expected that this trend will continue. In terms of city hotels, competition is growing, as an increasing number of four and three-star properties are underway.
The market share of this tier of hotels has been increasing over the three years, proving to be a resilient category of hotels during downturns. Hotel owners as now seeing three and four star hotels as a worthwhile investment alternative to five-star hotels.
Giving his take on the situation, Adeeb Ahamed, managing director of Abu Dhabi-based hospitality company Twenty14 Holdings said "a number of factors comes into play when taking into consideration the room rates, including the tourist inflow, purchasing power and even supply of hotel rooms. "
"Although new international chains have entered the market, we believe that Dubai is still a robust market for the hospitality industry, and the performances will be on par with the previous year," the managing director said.  DTCM for their part has aimed at attract 20 million visitors to Dubai by 2020, and the hospitality industry is on good track to creating accommodation for the tourists, Adeeb Ahamed said.
The same trend of three and four star properties has also been seen in Saudi Arabia. 
Looking to Doha, the city has been trying to reverse the trend of being an expensive destination relative to other cities in the GCC with high average daily rate (ADR) and low occupancy rates.
It will be difficult for hotels to maintain the same performance as 2015 this year, and it's expected that there will be a minimal decline in RevPAR in 2016. Several factors point to a flat or negative performance in 2016, including reduced economic growth due to lower oil prices, less liquidity in the region, reduced visitors from Europe, Russia and China due to currency fluctuations and the uncertain macroeconomic conditions.
While there have been no major delays or cancellations in terms of mega projects, we may see this happening in the second half of the year if economic conditions do not improve."

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