x Abu Dhabi, UAEMonday 24 July 2017

Dubai hotel occupancy climbs to pre-crisis levels

The rise in April has come despite an increase in supply over the past seven years as business travel lifts demand.

Demand for hotel accommodation in Dubai has risen to about 7.5 per cent per year on average since 2003, and at more than 9 per cent in the past three years. Jaime Puebla / The National
Demand for hotel accommodation in Dubai has risen to about 7.5 per cent per year on average since 2003, and at more than 9 per cent in the past three years. Jaime Puebla / The National

Dubai hotel occupancy levels climbed back to their pre-crisis peak last month despite an increase in supply over the past seven years as business travel lifted demand.

Hotels experienced a 2.2 per cent rise in occupancy to 84.8 per cent for the month and an 11.4 per cent increase year-on-year in the average daily rate to Dh1,065, according to STR Global.

A growth in demand spurred occupancy levels to a seven-year high last month.

“With a rising level of economic confidence in the market, business travel is again on the rise and the hotels in Dubai are enjoying substantial demand as a result,” said Grant Salter, the director of tourism, hospitality and leisure industry at Deloitte Middle East.

The rise comes despite an 8.1 per cent increase in the supply of hotel rooms. Among the properties that opened in the first quarter were the second tower at the JW Marriott Marquis Dubai, adding 294 rooms, and Marriott Al Jaddaf, with 408 rooms.

The city’s conference and exhibitions business was anchored by the Annual Investment Meeting, which last year attracted more than 6,000 delegates, and Middle East Film and Comic Con, which reported 21,000 fans.

Across Rotana’s 15 properties in Dubai, the occupancy rate was 87.1 per cent, a rise of 4.1 per cent year-on-year.

“The strong performance was boosted by events and exhibitions that attracted large numbers of international visitors and allowed our hotels in Dubai to increase yields,” said Omer Kaddouri, the president and chief executive of Rotana.

Despite the showing last month, occupancy levels on a full-year basis are not expected to reach pre-crisis levels just yet.

“Additional supply of hotels during the next 18 months is expected to keep occupancy growth in check, but it will remain at high for the medium term at least,” Mr Salter said.

There are 71 hotels that are under planning or construction, accounting for 22,000 additional rooms, according to a Deloitte-STR report released this month.

The upscale segment has 16 hotels with 6,200 rooms in the pipeline, while the luxury segment has 14 properties with 4,200 rooms waiting to come on-stream. The mid-market is expected to add 16 new hotels with 4,400 rooms.

The room rates, too, are yet to return to the pre-crisis levels.

Average room rates peaked in mid-2008 and fell sharply later in the year. In the luxury segment, prices fell to about Dh1,200 from Dh1,600, according to the report.

The seasonality of Dubai as a tourist destination means April’s room rates are 15 per cent below this year’s peak season of January.

Prices are expected to rise even though the increasing supply of hotel rooms will help to moderate the rate of growth in the coming years, Mr Salter said.

Demand for accommodation has risen to about 7.5 per cent per year on average since 2003, and at more than 9 per cent in the past three years.

“Supply of hotel accommodation is expected to rise at a similar rate, so assuming there are no shocks to the market we are comfortable that the additional supply of hotel rooms will not result in a meaningful decline in market performance,” he said.

But the trend could be checked after the Expo 2020, when Dubai “will have extensive room capacity as a legacy of the event”, according to the British travel services provider Hogg Robinson Group in February.

Monaco, Paris, New York, Dubai and London are the top five cities globally in terms of room rates for the first quarter, Deloitte reported.

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