Emaar Properties' new budget hotels unit plans to target Dubai's up-and-coming theme park destinations.
The developer behind Burj Khalifa has until now focused on the luxury segment through its partnership with Giorgio Armani, with which it plans to develop about 10 hotels over the next decade.
Now surging visitor numbers to the emirate are also encouraging the company to target mid-range and budget travellers with its recently launched Dubai Inn brand.
"Theme parks traditionally attract short-haul leisure seekers that come in family groups and the central location of Dubai Inn hotels, in close proximity to these leisure attractions, will appeal to these visitors," said Ahmad Al Matrooshi, the managing director of Emaar.
The property developer is also partnering with Dubai-based Meraas Holding to build the 11 million square metre mixed-use Dubai Hills Estate, which will feature an 18-hole golf course. It is also in talks with Dubai Holding to develop Dubai Creek Harbour, a 6.5 million sq metre project.
Emaar is also expanding The Dubai Mall, already among the world's largest, which attracted 65 million visitors last year. The aim is to attract 100 million visitors a year, according to the company.
There are at least six theme parks in the pipeline for Dubai, including the IMG Worlds of Adventure, based on characters from the Marvel comics and Cartoon Network TV channel.
In November, Meraas announced a plan for five theme parks in Sheikh Mohammed bin Rashid City.
The property heavyweight's expansion into the budget hotel segment is a sign there is room for growth in the area, say analysts.
"Emaar is capitalising on a niche segment that is currently undersupplied," said John Podaras, an independent hotel analyst in Dubai.
Last week, the developer opened its first Vida Hotels and Resorts property in Downtown Dubai.
"Budget hotels can be built for less than US$100,000 a key and, if strategically located, could achieve a return on investment much higher than a five-star hotel," said Peter Goddard, the managing director of TRI Hospitality Consulting Middle East in Dubai.
Ibis Hotel, which first opened in Dubai at the Trade Centre more than a decade ago, now operates 12 such hotels. The brand is in the economy category and part of Accor Group, which runs 12 Novotels in the mid-range category. The group will open five more Ibis and six more Novotel hotels before 2015.
Dubai's bid to host Expo 2020 is one factor behind emerging interest in the underserved budget traveller segment.
Another is with an eye on Dubai's Expo 2020 bid, but according to Mr Podaras, this is part of longer-term plan.
"If Dubai's bid for the World Expo succeeds, the city will welcome over 25 million visitors during the six-month period, with 70 per cent being international visitors," said Mr Al Matrooshi.
"Following 2020, we expect tourism to continue its sustained growth given the city's status as the region's tourism and business hub."
In mature hotel markets, such as the United States and Europe, the supply of mid-scale and budget accommodation accounts for more than half of the market's bedroom stock. In Dubai five-star hotels dominate, with more than a 60 per cent market share and about 50 per cent of pipeline supply, said Jonathan Wall, the assistant director for property advisory at Deloitte & Touche Middle East.
"There is, therefore, a significant gap in the hospitality and tourism market that is currently not being catered for and Dubai hoteliers will need to start focusing less on five-star hotel accommodation and more on mid-scale and budget accommodation in order to realise Dubai's tourism growth vision," he said.