Room rates in Dubai are likely to stay under pressure as a growing number of hotels continue to compete for business, despite signs of an improvement in demand. "It's a question of survival more than anything else for this year and hoping next year things will turn around and start to pick up," said Sami al Ansari, the chief executive of Ishraq Gulf Real Estate Holdings, which launched the budget Holiday Inn Express brand in Dubai.
"Signs of improved demand for the remainder of 2009 are evident, nevertheless pressure continues on room rates as a result of fierce competition," he said. A 15 per cent increase in the number of rooms is expected next year, which would be a 40 per cent rise compared with last year, according to Mr al Ansari, who said he remained "cautious" about the outlook for next year. "The challenge for asset owners is to really try to avoid losing money and to make ends meet, being able to generate enough cash to continue to pay your loans and interest and, hopefully, this would be a passing phase of a year or 18 months."
Hotels in Dubai have seen a 35 per cent drop in revenue per available room through to August compared with the same period last year as rates and occupancy levels have fallen because of new hotel openings and a decrease in demand. Marc Dardenne, the chief executive of Emaar Hospitality Group, which owns The Address brand, said the crisis was "a good thing" in the sense that developers who had tried to launch new hotels in the emirate during the boom period with little planning could be weeded out.
"I think during the crisis time you will see who are the real players in the market: who can deliver quality and who can deliver value to their customers," he said. "The best will survive and some will, unfortunately, not survive." Mr Dardenne said Dubai had been overpriced and rates had now come down to a more reasonable level. "The last two years in Dubai were, in a sense, unrealistic and as a result it became the most expensive destination in the world."
Meanwhile, Paul Bell, the managing director of Aldar Hotels and Hospitality, said Abu Dhabi, which with 13,000 rooms was still a relatively small market, had the opportunity to learn from other markets. Abu Dhabi plans to double its supply over the next three years. Aldar is set to open eight hotels in the emirate in the coming weeks, seven on Yas Island in time for the Abu Dhabi Formula One Grand Prix.
"I think Abu Dhabi is in a slightly different position to Dubai," said Mr Bell. "It's not dissimilar but it's at a different point in the cycle and it has a very different supply and demand situation. I think this will level out as the supply comes into the market. We have to make sure the supply and demand balance remains in some kind of equilibrium." @Email:firstname.lastname@example.org