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Abu Dhabi, UAEThursday 15 November 2018

Nakheel to invest Dh5bn in new hotels in five years, chairman says

Developer signed agreement with Thailand's Centara Hotels & Resorts to build 601-room hotel on Deira Islands

Nakheel, which is building the Deira Islands mixed-use scheme, signed a Dh500 million deal on Thursday with Thailand-based Centara Hotels & Resorts, to develop a four-star beach hotel on Deira Islands. Victor Besa / The National 
Nakheel, which is building the Deira Islands mixed-use scheme, signed a Dh500 million deal on Thursday with Thailand-based Centara Hotels & Resorts, to develop a four-star beach hotel on Deira Islands. Victor Besa / The National 

Nakheel, the Dubai-based real estate developer behind the Palm Jumeirah, plans to invest Dh5 billion in new hotel projects over the next five years as part of a Dh27bn retail and hospitality expansion to diversify its offerings, its chairman said.

The private company, which is building the Deira Islands mixed-use scheme, signed a Dh500m deal on Thursday with Thailand-based Centara Hotels & Resorts, to develop a four-star beach hotel in the scheme, with construction starting next week.

“The four-star hotel segment is the fastest-growing hotel segment in Dubai at present, with 10 per cent year-on-year growth in hotel rooms last year,” Nakheel chairman Ali Rashid Lootah told reporters at the company's headquarters.

Nakheel has two operational hotels in Dubai at present – in Dragon City and Ibn Battuta Mall, both of which opened in 2016 – six others under construction and five more in the pipeline, totalling 6,658 rooms.

Hotel revenues and room rates across the Middle East have been subject to steep declines in recent years because of low oil prices denting consumer spending power, and rising supply of hotel keys as the market matures.

Average revenue per available room (RevPar) in Dubai fell by 13.3 per cent year-on-year in April, according to an EY hospitality sector report earlier this month. Despite lower revenues, hotel occupancy rates across Mena are holding up, the report added, attributing it to resilient demand.

Dubai received 4.7 million international overnight visitors in the first quarter of 2018 – a 2 per cent rise from the same period last year, according to the latest figures from Dubai Tourism, part of the government.

Centara Deira Islands Beach Resort will have 601 hotel rooms and is due to complete in the fourth quarter of 2020, the partners said. Thai hotel group Centara is part of Central Group, a diversified company with interests spanning real estate, retail, hospitality, merchandising and food and beverage.

Nakheel expects to award a further Dh2bn of contracts for Deira Islands over the coming year, taking the total to Dh10bn by mid-2019, Mr Lootah said.

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Deira Islands intends to transform ‘Old Dubai’, near the Creek and Port Rashid, into a new retail, tourism, residential and leisure development adding 40 kilometres to Dubai’s coastline. In June, Nakheel awarded a Dh450m contract to build a 12-lane bridge connecting the islands to the Dubai mainland, improving transport infrastructure to the scheme.

There are fresh plans to be unveiled later this year for a collection of high-end beachfront apartments at the project, Mr Lootah said. These are expected to go on sale in the fourth quarter of 2018 or the first quarter of 2019. They will be the first beachfront properties on Deira Islands, as other planned residential units at Deira Islands are located in the centre of the development.

The chairman said there are no plans to take Nakheel public, however, he would be “open” to a collaboration with an Abu Dhabi real estate developer similar to the partnership between Dubai’s Emaar Properties and Abu Dhabi’s Aldar Properties announced in April.

That said, Dubai is the main focus for Nakheel, as well as the northern Emirates of Sharjah and Ajman where the company has a retail joint venture and plans to announce “two or three” other tie-ups with local development partners this year and next, Mr Lootah added.

The Deira Islands hotel is the first project in partnership with Thai-based Centara but Nakheel expects further collaborations in future, the chairman said. Nakheel would also consider a tie-up with Centara to expand outside of the Middle East, for example in Europe, Asia and Africa.

Centara entered the Arabian Gulf last year with the opening of the Centara Muscat Hotel, and targets expansion in the Middle East in the years ahead. “We see opportunities across a range of sectors, including hospitality, retail, residential and others,” Suparat Chirathivat, executive vice-president, corporate development, at Central Group, told reporters.