Dubai Hotels To See Robust Occupancy in 2013

Sep 28, 12 | 12:03 am

By Peter Goddard

I recently attended the Great General Managers Debate at the Jumeirah Beach Hotel in Dubai which attracted over 180 hotel managers from across the Gulf Cooperative Council (GCC). Given that the focus of the debate was on the hotel and resort market in Abu Dhabi and Dubai, I had the opportunity to canvas opinions on how each market is performing.

Most hotel managers agree that the Abu Dhabi hotel market has experienced a dramatic shift in performance in recent years. The substantial growth in hotel room supply and a notable slowdown in traditional growth sectors such as financial services, real estate and tourism in 2009 and 2010 caused performance levels to drop significantly during these years. Despite the tough conditions, the city saw some green shoots of recovery in 2011/12 owing to the growth in tourist arrivals, mainly from Mena and Asian countries.

Despite the growth in overall tourism activity, hotel performance in Abu Dhabi has remained subdued in the first eight months of 2012. TRI’s HotStats Survey indicates that rooms occupancy for the four and five-star chain hotels in Abu Dhabi increased by 1.5 percentage points compared to the same period last year, while average room rate declined by 15.1 per cent during the period. The combined effect of these changes resulted in a 13.1 per cent drop in RevPAR (revenue per available room) to $91.68 (Dh336.7).

The influx of supply over the last three-four years appears to have caused a temporary oversupply in the market, mainly in the five-star segment. Total rooms supply has jumped from roughly 13,000 in 2008 to about 22,000 in the first half of 2012, according to government estimates. The upscale hotels’ decision to cut rates in response to the growing competition to shore up occupancies has caused a ripple effect across the market as other segments followed suit to maintain market share, affecting room rates across the market.

Interestingly, the Abu Dhabi Tourism Authority is implementing a demand diversification plan for the tourism sector in Abu Dhabi as part of the larger Plan Abu Dhabi 2030, which focused on the development of MICE (meetings, incentives, conferences and exhibitions) and leisure-related infrastructure in the emirate. Key development projects on Yas and Saadiyat Islands, such as the Yas Waterpark and the Louvre and Guggenheim Museums, are seen as a positive step forward as they will increase leisure-related demand. These attractions will develop Abu Dhabi as an all-inclusive destination providing greater stability in the future as it diversifies demand away from the traditional markets such as corporate and government demand. However, in our opinion, material improvements in occupancy are not likely to occur until 2014/15.

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