Abu Dhabi, UAEWednesday 21 August 2019

Abu Dhabi luxury hotel rates driven down by oversupply

Room rates in Abu Dhabi's luxury segment are falling with increased competition but is also driving occupancy.
Qasr al-Sarab Hotel in the desert south of Abu Dhabi. Wissam Keyrouz / AFP
Qasr al-Sarab Hotel in the desert south of Abu Dhabi. Wissam Keyrouz / AFP

Increased competition is causing a decline in room rates at luxury hotels in the capital despite rising occupancy rates as more people visit Abu Dhabi.

Almost 850 rooms are set to enter Abu Dhabi by the end of the year, and an additional 3,450 rooms will come by the end of 2016, mostly in the five-star segment, taking the overall supply to 22,300, according to a report from the property consultants JLL.

“Heavy competition has caused hotels to reduce rates to drive occupancy across the city, particularly in the upscale segment,” the JLL report said.

The emirate’s 149 hotels and hotel apartments recorded a 33 per cent jump in guests in February year-on-year, with occupancy reaching 81 per cent, a 4 per centage point rise on last year. About 262,000 guests checked in, and guest nights rose 21 per cent month-on-month to 815,718.

In the first two months of the year, the average room rate dropped 9 per cent to Dh458, according to the Abu Dhabi Tourism and Culture Authority.

The JLL report pointed out that average daily room rates in the capital registered negative growth of 14 per cent in the first quarter, pulling down the revenue per available room.

There also seems to be a disparity between luxury room rates in the capital and Dubai. Weekend rates at the Eastern Mangroves Hotel and Spa by Anantara in Abu Dhabistart at Dh900 per room per night, compared with Dh1,940 for Anantara’s resort on the Palm Jumeirah.

“The Abu Dhabi market in general is a very competitive one, with a wide supply and diverse offering,” said Binu Varghese, the area director of revenue at Anantara Hotels Resorts and Spas Abu Dhabi. “Therefore rates are extremely competitive as hotels compete for guests and base business.”

But the drop in rates is paying off as the number of tourists and occupancy levels in Abu Dhabi hotels continue to rise.

Anantara Hotels Resorts and Spas Abu Dhabi started the second quarter with an increase in group bookings. It expects to close April with an average occupancy of 65 per cent in the capital, 60 per cent at Qasr Al Sarab Desert Resort by Anantara and 62 per cent at its Sir Bani Yas Island property.

“The new wave of hotels in Abu Dhabi has certainly created demand and is attracting new markets, specifically in the leisure and [business travel] segments, so we have seen a marked upwards trend in our five properties [this year], in comparison to previous years,” Mr Varghese said.

In the medium term, the tourism outlook is favourable.

“Tourism demand is expected to go through a step change in the medium term as various major projects come to fruition, including expansion of the airport and Etihad Airways, major new visitor attractions on Saadiyat and Yas Islands, global marketing campaigns and continual capture of stopover demand,” JLL said

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Updated: April 27, 2014 04:00 AM

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