x Abu Dhabi, UAEFriday 28 July 2017

Upgrade heat on unbranded and older budget hotels in Dubai

The old city centres of Deira and Bur Dubai remain attractive for branded budget hotels though pressure is on older ones to upgrade.

The Premier Inn in Dubai is across the highway from Terminal 3 of Dubai International Airport. (Lee Hoagland/The National / February 6, 2013)
The Premier Inn in Dubai is across the highway from Terminal 3 of Dubai International Airport. (Lee Hoagland/The National / February 6, 2013)

While demand for budget hotels in Deira and Bur Dubai remains high, pressure is growing on older, unbranded properties to step up their game.

The historic trading centres have 288 hotels, with almost 76 per cent in Bur Dubai not affiliated to any international chain, and this rises to 90 per cent in Deira, according to Colliers International, the commercial real estate company. This provides hotel chains an opportunity to capitalise on their brand names, said Filippo Sona, the regional head of Colliers’s hotels division.

While these areas are expected to sustain properties of up to four stars, further government investment such as Aladdin City within the dhow port in Al Rigga will create scope for upscale hotels, he said.

Nakheel’s Deira Islands mega project too will give the district a face lift. The developer released 94 plots for hotels and resorts in March, which is expected to add 23,000 new hotel rooms.

For the British budget brand Premier Inn, Deira and Bur Dubai are as important as the newer neighbourhoods.

“For us it’s being where there are strong demand generators,” said Paul Macpherson, the managing director of Premier Inn. “We see Deira and Bur Dubai being attractive areas for Premier Inns, as they need smaller plots and more affordable construction.”

The hotel chain owned by the Whitbread, the United Kingdom’s largest hotel, restaurant and coffee shop operator, plans to open 15 hotels in the Arabian Gulf in the next three years. Of those. half would be in the UAE.

Premier Inn has three properties in Dubai and two in Abu Dhabi. It will open its first in Sharjah hotel at the end of the year.

Areas near Dubai World Central are some other locations the company is looking at for new hotels.

“The only challenge is the increase in land price,” Mr Macpherson said. “With all the attention [on hotels] and great opportunities, comes demand for land, and that is affecting returns [for investors].”

Construction costs are also drifting upwards and that is affecting the segment, he said.

The UK brand has a joint venture with Emirates Group and works with the Dubai-based developer Action Hotels to expand its portfolio.

The Scandinavian hotel chain Rezidor Hotel Group is also looking to aggressively expand in the UAE, as it sees increasing demand across budget and luxury segments. It said there were opportunities for its mid-market brand Park Inn by Radisson in Deira, Bur Dubai, Al Barsha, Jebel Ali and Jumeirah Village Triangle.

“There is a huge need in Dubai and we could easily double the number of our hotels, especially in the mid-market and resorts segment,” said Elie Milky, the region’s director of business development at Rezidor Hotel Group.

Deira and Bur Dubai remain attractive for brands such as Radisson Red, Park Inn by Radisson and serviced apartments.

“There is a lot of demand there, and there are a lot of hotels that are unbranded and doing well. Having branded accommodation in those areas would attract even more demand in those areas,” he said. “You have the creek as the major attraction, the gold souq, the museum and that area is becoming the world heritage site.”

Its Radisson Blu hotel in Deira is one its best performing hotels in Dubai.

But pressure is high on older hotels in the area to upgrade.

“To stay competitive they will need to upgrade their facilities to maintain their market share,” Mr Sona said.

The 30-year-old Sheraton Dubai Creek Hotel and Towers reopened this month after a US$50 million renovation, while Al Bustan Center and Residence is undergoing a $4m upgrade.