Hotels form vital plank in Aldar plans to diversify revenue

LOCATION 6: The unique Yas Viceroy Abu Dhabi will be a filming location for the car-focused film Race 3 - which is apt, considering it sits alongside the Formula 1 track.

Aldar plans to open more hotels as part of its ongoing efforts to diversify revenues beyond those earned from property sales.

“There is definitely a need for serviced apartments in Abu Dhabi, there is demand for four- and three-star level hotels in the city of Abu Dhabi,” says Mohammed Al Mubarak, Aldar’s chief executive.

Its development projects will increasingly feature serviced apartments and hotels to complement residential and retail components. “A lot of our future thinking is going that route,” he says.

Recurring revenues more than doubled between 2012 and 2015 to Dh2.9 billion thanks to its expanding portfolio of assets that includes schools, retail and offices as well as hotels. Recurring revenues contributed to 62 per cent of total revenues and 68 per cent of net operating income last year compared with 11 per cent and 15 per cent, respectively, in 2012.

Aldar is targeting a growth of 6 per cent year-on-year in 2016 for recurring net operating income to Dh1.6bn and by 2020 to have grown this by 45 per cent to Dh2.2bn, compared with last year.

“Yes I want to increase my recurring revenue, I will continue to increase my recurring revenue. That strategy is always going to be enhanced. Because I believe in the long-term prosperity of my sites,” says Mr Al Mubarak.

Currently hospitality and leisure assets are predominantly hotel properties on Yas Island such as the Viceroy. They make up 8 per cent of the overall recurring portfolio, contributing 22 per cent of recurring revenues.

Its hotels are also outperforming the overall Abu Dhabi market both in terms of revenue per available room (RevPar) and occupancy levels.

Last year occupancy was at 79 per cent compared to 75.4 for Abu Dhabi and RevPar growth was at 4.3 per cent when the overall market was flat.

However, we are currently in a softening market, the latest data shows. Abu Dhabi’s average occupancy rate in February was 77.6 per cent, down from 81.5 per cent a year earlier, according to Hotstats data from TRI Consulting.

The average daily room rate was Dh157.95 in February this year, down from Dh217.20.

“At the moment the hotels on Yas are doing well [compared with the overall market]. We all know that, basically, it is a tough time for hospitality in Abu Dhabi, we all need to come closer together [to ride it out because] we all know that there are new hotels coming,” says Mr Al Mubarak. About 8,000 new rooms are expected to open in the next five years, according to the Abu Dhabi Tourism and Culture Authority (TCA Abu Dhabi), of which Mr Al Mubarak is chairman. There is now a focus on attracting visitors from India, China, Africa and the Arabian Gulf as the emirate looks to build on the 4.1 million guests who checked into Abu Dhabi’s hotels last year, staying a total of 12.24 million nights.

“We work very closely with tourist offices around the world to make sure that Abu Dhabi and Yas Island is on their stop,” says Mr Al Mubarak.

According to Citibank research analysts last month: “Aldar’s hotels have seen a very healthy performance over the past year, leveraging on Abu Dhabi’s tourism strategy, Etihad [Airways’] expansion into new destinations and its strategic location next to major retail and leisure destinations such as Yas Island.”

Mr Al Mubarak agrees that the outperformance of Aldar’s hotels is partly down to the particularly strong draw of “destination” hotels and the growing number of attractions on Yas Island such as the recently announced Warner Bros theme park that will build on what is already there, such as Ferrari World Abu Dhabi.

“Today our hotels on Yas Island continue to do better than the market and the more assets that come to the island, again this is Aldar and [the theme park developer] Miral working very closely with each other, the more we know we can start selling this island even better. The more we can have more visitors, the more we can have destination management [and] more hotels.”

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