A glimpse into the hospitality rush in UAE

A glimpse into the hospitality rush in UAEThe Address Fujairah Resort + Spa in Sharm, Fujairah / Image Credit: Supplied

International and regional hotel groups are expanding in the UAE as Dubai has announced plans to boost its tourist numbers to 20 million visitors per year by 2020, or a growth of 7-9 per cent annually. Last year Dubai saw 14.2 million overnight visitors, a 7.5 per cent climb over the previous year. This year the emirate expects to receive 15 million overnight visitors, according to a top tourism official.

The first quarter saw 4.1 million arrivals in Dubai, reflecting a 5.1 per cent rise year-on-year. The highest footfall increase came from India and the GCC, according to the Department of Tourism and Commerce Marketing (DTCM). Visitors from Saudi Arabia grew 14 per cent to 476,000, whereas those from India rose 17 per cent to 467,000.

Driven by the UAE's reputation as a business and leisure hub, rising tourist numbers and extensive infrastructure development, major hoteliers are confident about the emirate's hospitality prospects. According to the DTCM, Dubai has 676 hospitality establishments as of March, with 98,949 hotel and hotel apartment rooms. Dubai targets 138,000 rooms by the end of 2018.

UAE hotels recorded the highest occupancy rate in the Middle East last year, despite feeling the effects of the global economic slowdown, low oil prices, currency fluctuations and geopolitical unrest. According to research firm STR Global, hotels in the Middle East reported negative year-end results last year. Compared with 2014 figures, the Middle East reported a 2 per cent decrease in occupancy to 67.4 per cent, while average daily rate (ADR) was down 2.6 per cent to $192.82 (Dh708), and the revenue per available room dropped 4.6 per cent to $129.98.

The UAE also reported decreases in each of the three key performance metrics, following a trend in the rest of the Middle East, although it recorded the region's highest occupancy at 74.8 per cent. The UAE's ADR declined by 6.2 per cent to Dh705.75 and revenue per available room (RevPAR) fell by 6.7 per cent to Dh528.19. The country's supply grew 6.2 per cent last year, outpacing demand growth of 5.6, which resulted in a decline in occupancy, ADR and RevPAR.

Dubai, however, recorded the highest ADR in the first quarter among major markets around the world, according to STR. This marked the 12th consecutive year that Dubai has led the market. Even with a 10.1 per cent drop in year-on-year comparisons, Dubai's ADR for the first quarter was $234.88. Only three other major markets finished the quarter with ADR levels above $200 in constant currency: Paris, New York and Singapore.

Hoteliers are therefore confident Dubai's hospitality sector will pick up soon amid the recent challenges. Pierre Sokhon, Group General Manager or Al Khoory Hotels, says the drop in average room rates is only temporary.

''In our hotels, there has been a drop in the average room rates,'' says Sokhon. ''In spite of the decline in rates, hoteliers are still able to make profits, as the city continues to witness a high occupancy rate. In our hotels, we are not going below 90-91 per cent occupancy rate year round, and we anticipate this will be maintained. The occupancy rate has dropped by 2 per cent at the most and considering what is happening in the region, with oil prices, currency fluctuation, etc., maintaining such high occupancy rate is an achievement.

''The Dubai Government and DTCM are actively supporting the hospitality sector in every way, coordinating with hospitality professionals every two to three months, updating and sharing information and plans and being open to suggestions. The government's promotion board has planned major activities, exhibitions, events, fam trips, etc., to promote Dubai as a destination.'

With major entertainment and leisure projects in the pipeline, including the IMG World of Adventures and Dubai Parks that will both open this year, Dubai Eye, which is set to become the largest Ferris wheel in the world, and a new Warner Bros. resort on Yas Island, Sokhon says the UAE is expected to attract more tourists in the short term.

Market shift

Upmarket establishments dominate the hospitality industry, however, many operators are addressing an increasing need for more affordable accommodations due to a growth in demand from China, India and other GCC countries. Dubai is also seeing more younger travelers and families on a budget. The upcoming World Expo is also expected to spur demand for mid-market hotel and hotel apartments.

Al Khoory Hotels, part of Dubai-based Al Khoory Group, is one of the hospitality firms looking to cater to this demand, as it plans to open three- and four-star hotels with a combined 1,100 rooms by 2019. The company's latest mid-market property is the 227-room Al Khoory Atrium Hotel Al Barsha, which is set to open this year. Other projects include a 69-room Al Khoory Inn Bur Dubai by 2017, a 370-room Al Khoory Plaza Hotel Deira and a 99-room Al Khoory Central Hotel and a 159-room Al Khoory Courtyard Hotel, which will both open in Al Quoz in 2019.

Emaar Group has also entered the mid-market segment with the launch of Rove Hotels. Chris Newman, Corporate Director of Operations of Emaar Hospitality Group, said the Group, in collaboration with Meraas Holding, will open 10 Rove Hotels with over 2,660 keys in Dubai and in the region.

''Rove Hotels addresses the growing need of the fast-growing, value-conscious leisure and business travelers by offering them a hospitality experience in central locations in the city,'' says Newman. The Rove Downtown Dubai opened in May as the brand's first property. It has 420 rooms and is right next to The Dubai Mall.

The Group also launched the Rove Satwa, a twin-tower development in the Satwa neighborhood that will feature Rove Home Satwa, the first serviced residence concept under Rove Hotels. The project will have 480 hotel rooms 157 serviced apartments, which are open for sale to investors.

Other upcoming properties under Rove Hotels in Dubai are Rove Port Saeed, which will have 270 rooms next to Dubai International Airport, Rove Oud Metha, which will have 286 rooms near Dubai Health Care City, Rove Dubai Marina, which will have 384 rooms, Rove Al Jafiliya, with 270 rooms near the Dubai World Trade Centre, and Rove At The Park, with 458 rooms next to Dubai Parks and Resorts.

Hospitality projects announced by other hotel brands include The Dusit-Princess Aces, a new hotel apartment project by Dusit Hotels and Resorts in Jumeirah Village Circle.

Indian operators

Last year about 1.6 million Indians visited Dubai, making India the emirate's largest source market. Major Indian hotel brands are taking notice. Lemon Tree Hotels, a chain of upscale business and leisure hotels, is expanding in the region with a mixed offering. Lemon Tree Hotels will bring three of its brands to the GCC: the upscale Lemon Tree Premier, midscale Lemon Tree Hotels and the competitively priced Red Fox Hotel.

Sanjay Chimnani, Managing Director of Raine & Horne Dubai, which has been appointed as GCC representative of Lemon Tree Hotels, says the Indian market could grow bigger in the coming years.

''Last year there was a 27 per cent growth in visitors coming from India,'' says Chimnani. ''The first quarter this year showed a further 17 per cent rise in Indian tourists, despite the strong US dollar position. The country has a significant need for quality, affordable hotels and hotel apartments to cater to all types [of visitors]. The Dubai Government is also encouraging developers by exempting the 10 per cent Dubai Municipality fee for any three or four-star hotel.''

Luxury projects

While there is movement towards the mid-market, there are also a number of luxury hotels and resorts in the pipeline in the lead-up to Expo 2020. Emaar Hospitality Group, in partnership with Eagle Hills, an Abu Dhabi-based private real estate investment and development company, will operate The Address Fujairah Resort + Spa in Sharm. The resort will have 196 rooms, 177 hotel apartments and 10 villas.

Address Hotels + Resorts is also expanding in Dubai with three new hotels in Downtown Dubai: The Address Boulevard Dubai (196 rooms and suites), The Address Sky View Dubai (169 rooms) and The Address Fountain Views Dubai (193 rooms). The Address Downtown Dubai, which has 196 rooms, is being redeveloped.

The hospitality group's serviced residences portfolio in Dubai includes The Address Residences Boulevard Dubai (532 rooms), The Address Residences Sky View (524), The Address Residences Fountain Views (774) and The Address Residences Dubai Opera (809). The Address Residences Downtown Dubai, which will have 626 fully serviced units, is also being redeveloped.

Under its Vida Hotels and Resorts brand, Emaar will also open two hotels and three serviced residences in Dubai. With these new openings, Emaar is adding a total of 3,835 hotel rooms and 4,249 serviced residences to the market.

Dubai-based Omniyat Group also has big plans with over 2,000 luxury hotel rooms and serviced apartments by 2020. By the third quarter next year, the company will open the hotel portion of The Opus in Downtown Dubai.

Among the new entrants in the market, private developer Azizi Developments is launching its first high-end serviced residences project, Candace, at Al Furjan.

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Source: Hina Navin, Special to Property WeeklyPW


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