Low overheads and long-term stays offer an attractive opportunity for hospitality trade.
UAE luxury hotel apartments gain in popularity
An increasing number of luxury hotel apartments are opening in the UAE as investors aim to capitalise on the value they offer and their popularity among GCC travellers.
One of the latest to open its doors is the Fraser Suites property on Sheikh Zayed Road in Dubai, which had its official launch yesterday.
"Of course everyone has a lot of doom and gloom, but to me it is picking up," said Choe Peng Sum, the chief executive with Frasers Hospitality, a Singapore luxury hotel company, of the Dubai hospitality market. "It's better to be prepared for the upswing than to shy away."
The hotel is owned by Ali and Sons.
There has been a substantial increase in hotel apartments in the past two years, said Mr Choe. But this had grown from a lower number of properties compared with the number of hotels in the emirate, he said.
Dubai's hotels have suffered a sharp fall in rates after the economic crisis and global downturn in travel, combined with an increase in supply.
Frasers Hospitality manages 35 properties in 21 cities including Bangkok, Shanghai, London and Paris. The company is planning significant expansion in the Gulf region with the Dubai hotel being the company's second in the region.
It opened a property in Bahrain in March and plans to open another in Qatar next year. Frasers also has a property under development in Oman and two properties under construction in Saudi Arabia.
"We certainly want to be in Abu Dhabi," said Mr Choe. "We are bullish about the Middle East."
He said the efficiency of hotel apartments was much higher than luxury hotels.
"There are no huge ballrooms and lobbies," Mr Choe said. "A lot of the spaces are put into the apartments rather than restaurants. Therefore, the net leasable area for earnings is a lot higher."
The hotel apartments building does have features such as a spa and sports club.
"The buildings are much more efficient because you don't need a lot of back-of-house facilities, which are costly," said Chiheb ben Mahmoud, the senior vice president at Jones Lang LaSalle Hotels.
Mr ben Mahmoud said serviced apartments had historically been aimed at the budget market but had evolved to a degree that the line between luxury hotels and apartments was blurred.
Mr Choe said business also tended to be more stable at hotel apartments because they had many more mid-term and long-stay guests.
"If you look at hotels you could face a situation of what I call a 'feast and famine' occupancy pattern," he said.
" In Asia, during the SARS [epidemic], hotel occupancies plunged down to 5 to 10 per cent, while serviced apartments were at 60 to 70 per cent. The financial crisis triggered knee-jerk reactions all over the world. People stopped travelling."
In Dubai, the company expects to have a significant number of GCC leisure travellers staying in its hotels.
Other luxury hotel apartments that have opened recently in Dubai include the those at The Address Dubai Marina and Bonnington Jumeirah Lake Towers.
Despite the increase in supply, the occupancy rate of hotel apartments increased to 68.8 per cent in the first half from 67.2 per cent in the same period last year, according to data from Dubai's Department of Tourism and Commerce Marketing.
In the past year, luxury branded serviced hotel apartments that have opened in Abu Dhabi include the Rotana Arjaan and the Staybridge Suites, which is part of the InterContinental Hotels Group, on Yas Island.
"There is a big gap in the market," said Fady Sawaya, the hotel manager of the Staybridge Suites in Abu Dhabi.
"We are seeing more investors attracted to this type of product as, from their perspective, it is an efficient model requiring low staffing levels to run the operation, in turn producing healthy profit margins."