Starwood Hotels & Resorts has signed up to manage three luxury hotels planned as part of Al Habtoor Group's US$1.33 billion (Dh4.88bn) project on Sheikh Zayed Road.
The properties, a St Regis, a W Hotel, and a Westin, which are to be built on the site of the Metropolitan Hotel and are expected to open in 2017, will add 1,675 rooms to the emirate's stock.
The Metropolitan, which operated for more than 33 years, closed last month and is being demolished. Al Habtoor, the project's owner and developer, has described it as a Las Vegas-inspired development, which is to include a theatre with more than 1,000 seats.
"This is another testament to growth in Dubai," said Guido de Wilde, the senior vice president and regional director for Starwood in the Middle East.
"We have 15 hotels in Dubai. This is the city where - with the exception of New York - we have the highest concentration of hotels."
Hoteliers in Dubai have reported strong growth in business this year, with many hotels regularly running at full occupancy, helped in part by unrest elsewhere in the region.
Figures from STR Global show a 22 per cent increase in revenue per available room in the first quarter of the year at the very top of the hotel market in Dubai compared with the first three months last year, Mr de Wilde said.
"You are seeing a trend which is in the hospitality industry bringing us on the path to peak years. There is a very high demand for Dubai. That is mainly driven by the positioning of Dubai as an international business and leisure hub. The average rates are not at the peak level yet. The occupancies definitely are. When occupancies come back, the rates follow. The rates are growing across all segments if you compare it to last year."
He said he expects the development to become a "destination within a destination".
"While 2011 witnessed an increase in occupancies, average room rates continued to fall," analysts at Jones Lang LaSalle said in a first-quarter report on Dubai. "The strengthening recovery in the hotel markets is reflected in an increase in average daily rates over the first quarter of 2012. Average rates showed an increase of about 9 per cent during the first two months of 2012 compared to the same period in 2011."
The demolishing of the Metropolitan is expected to take about three months. Excavation has already started on the land that has been cleared for the new property.
Starwood expects to open its St Regis hotel on the Corniche in Abu Dhabi at the end of August, Mr de Wilde said.