x Abu Dhabi, UAEMonday 22 January 2018

Hotels show signs of life in Dubai

There are signs of hotel development activity picking up in Dubai as tourists flock to the emirate.

The influx of tourists into Dubai has led developers to consider new projects and the restarting of projects that were put on hold as the economic crisis set in. Lee Hoagland / The National
The influx of tourists into Dubai has led developers to consider new projects and the restarting of projects that were put on hold as the economic crisis set in. Lee Hoagland / The National

The extravagant, celebrity-strewn opening party of the Atlantis resort on the Palm Jumeirah in November 2008 was beamed worldwide by news channels.

But few of the guests, who included Robert De Niro and Kylie Minogue, could have known that it also represented the high-water mark of the emirate's boom years.

Within weeks, the full extent of the downturn in the property market became apparent and lavish hotel projects across the emirate ground to a halt. More than three years on, some of those developments are lurching back to life, further signs of a recovery in the sector.

The influx of tourism into Dubai, helped by factors including the Arab Spring uprisings, the emirate's affordability compared with its pre-crisis peaks, and its increasing appeal to markets such as China, India and eastern Europe, means developers have started to consider projects and are restarting developments put on hold as the economic crisis set in.

"We will be looking for future projects [in Dubai] as the market improves," said Michael Scully, the managing director of hospitality at Seven Tides, a Dubai developer.

"Last year, there was an increase in tourism, and we're expecting another increase this year," Mr Scully said. "The interest in properties, particularly on the Palm, which is one of the leading places in Dubai as far properties is concerned, means that mixed-use developments are coming into their own again, and this is facilitating the fact that we can move forwards and complete projects."

The developer expects to open its Royal Amwaj resort on the Palm Jumeirah and its Oceana hotel, also on the island, in the first quarter of next year.

"The positive outlook on Dubai hotels, backed by a strong performance in 2011, has prompted a number of hotel developers, who had shelved their hotel projects and had put them on hold in 2009, to restart them," said Chiheb ben Mahmoud, the head of hotel advisory at Jones Lang LaSalle Hotels Middle East and Africa.

In October, Al Habtoor announced plans to restart work on its Dh1 billion (US$272.2 million) hotel on the Palm, citing the boom in the number of tourists coming into the emirate as a factor.

The developer is also expected this week to announce a hotel project on Sheikh Zayed Road.

Brett Armitage, the senior vice president of sales at Atlantis, The Palm, said the pick-up in development on the island would help to establish it as the essentially self-contained destination it was meant to be.

"The idea was that as Dubai was developed, there would be these pockets of experiences, so you could come on holiday and go to Dubailand or the Palm island," he said. "From my perspective, the more that comes into the Palm, the more it adds to the Palm becoming a destination in its own right."

He said room rates at Atlantis were up by about 8 per cent so far this year compared with the same time last year, while occupancy levels had increased by 15 to 20 per cent. "Last year was really a tremendous year for Atlantis and for the wider perspective of Dubai and Dubai tourism in general. All the indicators now are really positive," Mr Armitage said.

The addition of hotels on the island would mean that the property would have to work harder for its business as the competition increased, he acknowledged.

Analysts warned that developers should remain cautious.

"It should be highlighted here that projects that have been conceived in 2006 and 2007 should be seriously re-looked into with the benefit of the new hotel and tourism landscape. There are lessons to be learnt," Mr ben Mahmoud said. "Even hotel projects under construction should be reassessed. Even in the cases where it is too late to reduce development costs, it is important to make sure that the operating costs would not suffer any undue inefficiency, as well as the general positioning and value proposition of the hotel. The novelty and creativity factors should not be overstretched."