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Dubai Hotel Rates to Pick Up by End-2011
DUBAI — Dubai hotel sector will see resilience by end 2011 when room rates are expected to improve after remaining flat this year, said a leading global hospitality industry consultancy firm.
Global leisure travel may take longer to improve and therefore leisure sector rates may remain depressed. With a large proportion of demand for Dubai hotel rooms being generated from the leisure sector, rate improvement may take longer toward the end of 2011 and beginning of 2012, said Julian Kemp, associate director, CBRE Hotels EMEA in a statement.
Apart from Dubai hotels’ exposure to the tourism sector, an oversupply of luxury accommodation will further delay recovery of room rates that witnessed a steep decline in 2009. Following a slump in demand for rooms from the global leisure sector, Dubai’s once vibrant hospitality sector witnessed a 10.2 per cent drop in hotel occupancy levels in 2009.
Kemp said globally hotel room rates would remain deflated in 2010 but a recovery in Dubai might take longer because the emirate was dependent on leisure markets improving. The general consensus among the industry is that “trading will be tough.”
“The UK is one of the prime sources of demand for Dubai and with a high degree of uncertainty in respect of the economy for this year, travel for both leisure and business is likely to remain depressed,” he said.
The immediate impact of this to Dubai hotels will be a loss in occupancy level, leading to a drop in room rates. “As a result, in our opinion the average room rate (ARR) is likely to decrease further or at best remain in line with results achieved in 2009.”
Kemp said he was still concerned about the continuing development of hotels within Dubai, with the increased number of rooms putting further pressure on hotels to achieve reasonable occupancy levels. The continuing development of five star deluxe hotels within Dubai will place pressure on occupancy levels ‘and thus the ability for hotels to charge high rates with many offering significant discounts, he said. “Hotels that occupy a prime location should be able to improve rate better than those properties that are considered to have a secondary location,” Kemp said
According to hospitality research firm STR Global Construction Pipeline report, Dubai has the largest number of rooms in the total active pipeline and in the “in construction phase,” with 30,222 rooms and 15,563 rooms respectively. For the UAE as a whole, there are currently 51,594 rooms in the pipeline and 28,153 rooms under construction.
STR Global figures suggest that Dubai experienced a drop of 10.2 per cent in occupancy levels from 77.2 per cent in 2008 to 69.4 per cent in 2009. “Compared to other global cities the percentage drop is higher than experienced by most European, North American and Asia Pacific destinations,” Kemp said, adding that some of this decline was due to the continuing development and opening of new rooms through the year in Dubai.
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