Dubai hotel rooms more profitable than counterparts in London and Amsterdam

The average hotel room in Dubai earns a gross profit that is more than three times as great as the average room in Berlin, according to new figures.

A total 11 million tourists checked into Dubai’s 611 hotels and hotel apartments last year. Lee Hoagland / The National

Dubai offers some of the most profitable hotel rooms in the world, according to the research company STR Global.

STR Global said the gross operating profit per available room in the emirate was US$184.35 last year. Gross operating profit takes into account operating costs such as food and payroll.

Eight-thousand hotels in 50 countries outside North America were surveyed for the annual study.

Dubai finished third in the ratings, behind Hong Kong and Paris, ahead of Singapore and London.

Properties in the Middle East and Africa reported the strongest growth at 5.4 per cent in gross operating profit per available room. The figure for Asia-Pacific declined by 0.5 per cent.

The strength of Dubai lies in demand as well as high food and beverage revenue compared with other markets in Europe and China, said Filippo Sona, the head of hotels at Colliers International’s Dubai office.

He said the average four-star or five-star hotel in Dubai has around five restaurants.

“Dubai’s average room rates and occupancies are high compared with the other locations, and therefore they have a high [revenue per available room] as a starting point,” he said. “Also, in the region overhead costs, and payroll in particular, are far less than in other continents as we don’t have a tax system. Labour costs are low, too.”

Year-round occupancy in Dubai ensures high profitability, according to David Shackleton, the chief operating officer of Dusit International.

“High demand from business and leisure [sectors], reasonable labour costs, and [status] as a global airport hub” all make it a profitable market, he said.

London, which is popular with Middle East travellers, clocked in at $163.01. The European market is driven by corporate business and reports lower spending in the food and beverage sector, Mr Sona said.

Among the gateway cities in the Asia-Pacific region, Beijing had one of the lowest profit figures at $15.83, while Sydney hotels showed a much better performance at $112.44.

“Occupancy has lowered massively compared to previous years in Beijing due to oversupply and food and beverage spending has also declined quite a lot,” Mr Sona said. “The conference and meetings market is also having a bad time as government has cut spending.”

While room rates at Dubai hotels have registered a steady increase over the past year thanks to rising demand, those in Abu Dhabi have not.

Last year 11 million tourists, a rise of 10.6 per cent over 2012, checked into Dubai’s 611 hotels and hotel apartments. By 2016, Dubai is expected to add 139 properties, including 91 hotels and 48 hotel apartments, according to the Department of Tourism and Commercial Marketing. The average room rate increased by 7 per cent to Dh629.

In Abu Dhabi, the profit figure was $74.22 last year, roughly on par with Amsterdam.

Abu Dhabi’s 150 hotels and hotel apartments checked in 2.8 million guests last year, an increase of 12 per cent. Its room rates touched Dh447.60 on average, dipping marginally by 1 per cent.

The UAE has the highest number of rooms under construction in the Gulf region at 17,137, according to STR Global. Saudi Arabia comes a close second on 15,415 rooms. Qatar, Jordan, Morocco, Egypt, Algeria and Iraq are among other countries in the Middle East and North Africa that have anywhere between 2,000 and 6,000 rooms each in the pipeline.

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