Plans for a 725-room hotel for the Capital Centre development in Abu Dhabi are "under deep study" as the company behind the project says it is not confident there is sufficient demand to support a property of this scale.
The National Corporation for Tourism & Hotels (NCT&H) had planned to open the Dh1 billion (US$272 million) Grand Millennium hotel this year.
"The original project was for over 700 rooms," said Hany Farag, the group chief financial officer at the NCT&H, an Abu Dhabi company that owns hotels including the InterContinental Abu Dhabi.
"The project configuration is under deep study and valuation by all parties. We are not confident that there is a market appetite for [an] additional 700 rooms for this location; however, it is one of NCT&H's goals."
Hotel profitability across Abu Dhabi has fallen sharply because of an increase in supply in the emirate. Among the properties opening last year was the 844-room Grand Millennium Al Wahda next to Al Wahda Mall.
Despite an increase in the number of hotel guests in the capital last year, total revenue - which was being shared by more hotels - remained at the Dh4.2bn recorded the previous year, as rates and occupancy levels dropped, according to data from the Abu Dhabi Tourism Authority. NCT&H also owns the former InterContinental hotel in Al Ain. At the beginning of this year, the operation of the property was taken over by NCT&H's own management division, Danat Hotels and Resorts, and the hotel was rebranded Danat Al Ain. Mr Farag said the hotel would undergo a complete renovation this year. Meanwhile, at the InterContinental Abu Dhabi, the company is planning to add spa and recreation facilities and a Lebanese restaurant and cafe.
Separately, the company has liquidated some of its shares because of "a stock market general decline".
"The company has a share portfolio, mainly in Aldar [Properties]," Mr Farag said.
"The board of directors has decided to liquidate [part] of the company's portfolio to cover the original investment cost. This will eliminate the risk of losses in capital." Additionally, NCT&H has a 50 per cent stake in the National Transportation Company, which owns and operates taxis and buses.
One of the company's projects is the Dh600m luxury Le Bristol hotel in the capital, expected to open late next year.
NCT&H is also planning to build a resort on Saadiyat Island.
The company this week reported its net profit fell to Dh130m last year compared with Dh149.2m the year before.
"The decline in profits is directly related to the hotel operations, mainly InterContinental Abu Dhabi," said Mr Farag, "With the opening of a number of new hotels in the year 2010 in Abu Dhabi, hotel performance in the city of Abu Dhabi has witnessed [a] decline, in particular in the room rates."