UAE hotels off to strong start in 2022 on Expo success and increase in visitors

Construction activity in the residential market continued to grow in the first quarter, property consultancy JLL says

The pool and beach of The Atlantis Palm Jumeirah. Dubai's occupancy rate was more than 77 per cent in January and February. AP
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The UAE's hotel market posted a strong performance in the first quarter of 2022 on the back of a successful Expo 2020 Dubai and returning international visitors, property consultancy JLL said.

Among the primary drivers of the momentum were beachfront and luxury developments, thanks to stronger demand for leisure properties, as well as upper-upmarket and midmarket hotels that posted higher average daily rates (ADRs), the Chicago-based consultancy said in its first-quarter report on Wednesday.

"Historically, operators in the UAE have focused their operational strategy on achieving their desired levels of occupancy but this has been at the expense of lower ADRs," said Khawar Khan, head of research for the Middle East, Africa and Turkey at JLL.

“Post-pandemic, operators may look towards adopting a more robust revenue management strategy to help owners achieve a higher bottom line. The resultant short-term impact may be a small dip in performance but it should ultimately lead to improvements in the longer term."

The performance was underpinned by the UAE's speedy recovery from the Covid-19 crisis, as proactive government policies instilled consistent investor confidence in the real estate sector and the overall economy.

The value of property deals in Dubai more than doubled in 2021, breaking a 12-year record in terms of property sales transactions, real estate portal Property Finder said in January. The emirate registered 61,241 sales transactions worth Dh151.07 billion ($41.13bn) last year.

Sales of luxury homes in Dubai also hit their highest level in 2021 since 2015, consultancy Knight Frank said last month.

The Abu Dhabi property market posted transactions worth Dh71.5bn in 2021, with the total number of transactions across sales and mortgage deals reaching 14,958 last year, Abu Dhabi's Department of Municipalities and Transport said in a February report.

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UAE hotels opening in 2022

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Hotels in Dubai and Abu Dhabi made strong starts to 2022. The completion of about 3,500 keys across Dubai’s hotel and hotel apartment projects resulted in total stock reaching 144,000 keys in the first quarter, JLL's study showed.

The emirate's occupancy rate rose more than 77 per cent in January and February, up from 62 per cent a year earlier, while ADR surged almost 53 per cent to $222. As a result, the emirate’s revenue per available room, or RevPAR – an industry benchmark – reached nearly $172, almost double the level a year ago.

In Abu Dhabi, the occupancy rate was at 75 per cent in the first two months of the year against 61 per cent a year earlier. The capital’s ADR jumped 20 per cent annually to $108, resulting in RevPAR of $81, up 47 per cent from the period a year ago.

Construction activity in the residential market, meanwhile, continued to grow as improving sentiment and rising demand from investors and end-users alike gave developers renewed impetus to deliver projects.

"There was a notable shift in investor and end-user behaviour during the pandemic, with greater preference being shown for completed residential units rather than off-plan ones," Mr Khan said.

The trend extended into the first quarter of 2022, with data from the Dubai Land Department showing that existing properties accounted for more than 70 per cent of all transactions.

Dubai’s residential stock rose to 657,000 units, with almost 17,000 delivered. Apartments accounted for the vast majority of total completions over the quarter. In Abu Dhabi 1,000 units were delivered, bringing the capital’s tally to 274,000.

Overall, JLL expects an additional 42,000 residential units to be completed in the remainder of 2022.

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Inside Legoland hotel in Dubai

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In the retail sector, about 186,000 square metres of retail gross leasable area came online in Dubai in the first quarter, bringing the total stock to 4.6 million square metres. There were no new project completions in Abu Dhabi during the period, JLL said.

Mall owners continue to offer incentives such as rent-free periods and low base rents, which remain on a downward trajectory. However, JLL sees signs of stabilisation. Average rents for primary and secondary malls in Dubai declined by 5 per cent year on year while there was no change in Abu Dhabi.

"Overall, the easing restrictions and ongoing recovery in tourism continues to provide some respite for the UAE’s retail sector," Mr Khan said.

In the office space bracket, Dubai recorded the delivery of nearly 6,500 square metres of office space in the first three months of 2022, pushing up total stock to almost to 9.1 million square metres. There were no notable completions in Abu Dhabi, keeping the overall supply level at 3.9 million square metres, as per JLL's estimates.

Rents in well-managed, good quality office buildings continued to recover. Average Grade A rents in Dubai's central business district were up 9 per cent year on year to about Dh1,840 per square metre per annum, while in Abu Dhabi it climbed 5 per cent to an average of Dh1,650 per square metre.

"Flexible workspaces are seeing strong interest from new market entrants, as well as some corporates who are taking a 'wait-and-see' approach before signing long leases elsewhere due to the evolving market situation. As a result, high-quality and well-located flexible office space providers are operating at near-full capacity," Mr Khan said.

Updated: April 20, 2022, 1:31 PM
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