UAE’s hotel sector records strong Q1 rebound

The UAE’s hotel market performed strongly in the first quarter of 2022, propped up by the World Expo and rebound in international visitors.

The uplift in overall performance was primarily driven by beachfront and luxury developments, which have been benefiting from strong leisure demand, according to JLL’s Q1 2022 UAE market overview report. Also, both upper-upscale and midscale hotels saw higher average daily rates (ADR).

Khawar Khan, head of Research for the Middle East, Africa & Turkey region at JLL, said operators may look towards adopting a more robust revenue management strategy to help owners achieve a higher bottom line post-pandemic.

“The resultant short-term impact may be a small dip in performance but it should ultimately lead to improvements in the longer term.”

Highest occupancy in 15 years

The UAE saw the highest occupancy in hotel bookings in 15 years during Expo 2020 Dubai. The average occupancy rate in hotels rose by a huge margin, with Dubai recording the highest occupancy rate of 80.7 per cent, according to data published by CBRE.

Expo 2020 Dubai recorded over 24 million visits during the six-month-long event and welcomed 192 countries. The event expedited the recovery of the local economy after the Covid-19 pandemic. In addition to the hospitality sector, retail, tourism, aviation, and many other industries benefited from the Expo.

In March, Dubai’s hotel industry reported 90 per cent or better occupancy in any given month for the first time since 2007, driven by the final weeks of Expo 2020, which concluded on March 31. “Like past editions of Expo in Shanghai (2010) and Milan (2015), the end of the ‘mega event’ proved to be the busiest for Dubai. The last time monthly occupancy in Dubai reached 90 per cent was March 2007 when there were roughly 90,000 less rooms in the market,” a report by STR said. Occupancy level reached 91.7 per cent in March while average daily rates hit Dh891.46 and revenue per available room at Dh817.9.

Commercial markets perform well

According to JLL, in the UAE’s office market sector, building on the momentum seen in the final quarter of last year, rents in well-managed quality office buildings continued to perform well. In Dubai, average Grade A rents in the CBD were up 9.0 per cent year-on-year to about Dh1,840 per square metres per annum in Q1 2022. On the same basis, Grade A rents in Abu Dhabi rose by 5.0 per cent to an average of Dh1,650 per square metres per annum. Financial and technology firms remain the main drivers of demand for Grade A office space, with a majority of leases being signed by occupiers active across those sectors.

“Flexible workspaces are seeing strong interest from new market entrants, as well as some corporates who are taking a “wait-and-see” approach before signing long leases elsewhere due to the evolving market situation,” added Khan.

The JLL report noted that in the residential market, an additional 42,000 units are expected to be completed. In the retail market, the easing restrictions and ongoing recovery in tourism continued to provide some respite. Certain retailers, particularly in the F&B segment, reported robust revenues – exceeding the levels seen prior to the Covid-19 pandemic.

— issacjohn@khaleejtimes.com