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Dubai will potentially have 140,366 keys between hotels and serviced apartments by 2020, according to a report. This is an increase from around 95,462 hospitality keys last year, says Filippo Sona, Director, Head of Hotels at Colliers International.
''There are around 169 hospitality projects in Dubai,'' says Sona. ''Moreover, the city is building some key projects such as Dubai Parks, Marvel World of Adventure, Dubai Creek, Bluewaters Island and Business Bay Canal, which will generate induced demand and allow new hotels to be absorbed by the market in the build-up to 2020.''
With such a large number of new hotel rooms and serviced apartments expected to come online in time for the World Expo 2020, Dubai is firmly establishing itself as a top global tourist destination. However, the emirate will have to fill certain gaps in the market to deliver a comprehensive hospitality offering.
Luxury properties constituted 26 per cent of the new supply last year, with five star hotels accounting for 60 per cent. Mid-market hotels comprised the rest of the total supply, but this segment represents an important link in Dubai's efforts to further expand its share in the global market.
''Developing mid-market hotels will enable Dubai to maintain its competitive position in the long term, as the city will be able to attract a broader audience,'' says Sona, noting how full-service hotels with more affordable prices can be a game changer for Dubai. ''Mid-market hotels, considering the selective range of services they provide, tend to be a very suitable asset class to provide higher economic added value to the city's retail industry, as for instance midrange hotel guests typically eat at local restaurants rather than in the hotel.''
Niall McLoughlin, Senior Vice-President of Damac Properties, believes various options should be available to cater to the needs of Dubai's growing number of visitors — be it for business or leisure. ''With the growing number of tourists coming to Dubai, hotels and serviced apartments will be always at high demand,'' says McLoughlin.
McLoughlin noted that more than 70 million passengers were registered at Dubai Airport last year, while only around 12 million entered the city. ''This number is expected to grow year-on-year to reach over 20 million by 2020,'' he says. ''This requires a solid infrastructure and service offering in Dubai that includes most of all various types of accommodation. Looking at the average occupancy rate in Dubai throughout the year [over 80 per cent in August as per HotStats], we believe that there is a growing need for lodging in Dubai throughout the year and especially during the peak season between November and April.''
Although a shortage in supply of mid-market hotels was evident over the last few years, Dubai's successful bid to host the World Expo 2020 has substantially increased the requirement in this segment, says Rashid Aboobacker, Associate Director of TRI Consulting. Hotel developers and operators are rushing in to capitalise on this opportunity. Hence, Dubai is seeing significant development in the mid-market hotel segment, particularly in terms of internationally branded three- and four-star hotels.
''A number of regional and international operators have announced plans to expand their mid-market hotel portfolios in the city and have introduced new brands into the market, which were not previously available here,'' says Aboobacker. ''By 2020, we expect the midmarket and budget hotel segments to expand further as the bulk of the additional hotel requirements will be in these segments.
''Dubai received 13.2 million [hotel and apartment guests] in 2014, up 8.2 per cent from 11 million in the previous year. In 2013, hotel guests accounted for 8.6 million and hotel apartments hosted 2.4 million guests. We expect similar growth rate this year, driven by the GCC and Asian markets.''
Considering the continued growth in tourist demand, he believes hotel investment in Dubai is poised to see strong growth in the coming years to meet Dubai's 20-million tourist target by 2020, in addition to the 25 million visitors expected during the Expo.
Even as the city has a growing need for budget hotels and serviced apartments, most of the hotel apartments launched recently fall under the luxury market segment such as those in Downtown Dubai, Emirates Hill and the Palm Jumeirah, says Ashraf Khan, Offplan Sales Manager at Exclusive Links Real Estate. ''The unit sales prices in these locations are in excess of Dh2,500 per square foot, when Dubai is needing options more in the region of Dh1,200-Dh1,600 per square foot,'' says Khan. ''The demand for hotel and hotel apartments in Dubai will continue to build on the back of tourism.
''As Dubai is gearing for Expo 2020, there will be demand for more hotel rooms, and developers are already preparing for that. Most of the Emaar Address and Vida hotels will be ready by then. Also, most of the hotels launched on the Palm Jumeirah will be completed and handed over by then.''
For high-end hotels, there are many options available in the city and also under construction as this segment will continue to be in high demand with high occupancy, says Khan. ''However, presently, when people look for budget options, they are restricted to Deira, Bur Dubai and areas around Al Barsha, behind Mall of the Emirates, whereas availability of affordable hotels and services apartments in freehold areas such as Dubai Sports City, Jumeirah Village Circle (JVC) and other Dubailand pockets is missing.
''We need to see Dubai opening its doors to more budget hotel options to cater to the needs of all income levels and a variety of visitors,'' says Khan. ''There are developers who are exploring this level of accommodation, for instance Skai developers has launched Viceroy Hotel and Apartments in JVC and Ashai Tower and Oasis Tower in Sports City.
''Moreover, soon we expect major developers like Deyaar and Damac to introduce more budget hotels or hotel apartments in their new areas such as Akoya, Akoya Oxygen and Dubailand.''
Hotel watch list by Rashid Aboobacker
• The Habtoor Palace on Shaikh Zayed Road will have three hotels (St. Regis, Westin and W) with 1,591 keys. Expected to open this month or early 2016.
• Palazzo Versace in Culture Village will have 215 keys and open this month.
• Nikki Beach Resort on the Palm Jumeirah is expected to open this month.
• Jumeirah Al Naseem (430 keys) will be an extension of the Madinat Jumeirah. It is expected to open later next year.
• Mandarin Oriental in Jumeirah will open in 2017.
• Dubai Pearl will have the MGM Grand and Bellagio hotels. It will open in 2018.
• Royal Atlantis on the Palm Jumeirah (1,050 keys) will open in 2018 or 2019.
Source: Hina Navin, Special to Property Weekly