Tough market hits Abu Dhabi National Hotels profit

A fall in value at Abu Dhabi's swanky Park Hyatt hotel and the cost of interest payments bit deep into profits at Abu Dhabi National Hotels.

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Costs associated with the capital's swanky Park Hyatt hotel bit deep into profits at Abu Dhabi National Hotels (ADNH).

The company reported that profits fell 24.8 per cent last year to Dh198 million (US$53.9m).

ADNH is one of the capital's biggest hotel owners, with a portfolio that also includes the Hilton, Le Meridien and Sheraton. It said revenue across the company increased by just 1 per cent during the year to Dh1.8 billion.

The group reported total net assets worth Dh9.799 billion - a 5.9 per cent fall from July.

Revenue for the hospitality division, which also includes the Al Diar portfolio of hotels as well as the Ritz-Carlton, which is under development, stood at Dh687m.

"The 2012 results were achieved in a very challenging market while the city continues to experience unprecedented growth in hotel inventory," said Salem Mohamed Athaith Al Ameri, the chairman.

"This fact just makes us more determined to build momentum through 2013 and with the opening of our flagship property, the Ritz-Carlton Abu Dhabi Grand Canal, in February."

The news comes as a spate of new hotel openings puts pressure on revenues in the capital.

According to figures from Jones Lang LaSalle, about 1,700 hotel rooms were opened last year.

Occupancy levels during the year to November fell by 4 per cent to 61 per cent, and average daily room rates fell by 7 per cent to Dh558 during the period.

And with cheaper hotel bills added to more empty rooms, the industry measure on hotel profitability - revenue per available room - fell by 14 per cent.

Jones Lang LaSalle predicted 7,200 rooms will open by the end of 2015 - including the Ritz-Carlton, Rosewood Sowwah Square and St Regis Nation Towers - bringing the total supply to about 23,000 and piling further pressure on rates.

"There has been a significant increase in supply at the luxury end of the market in Abu Dhabi and that has put a lot of pressure on occupancy rates," said Matthew Green, the head of research and consultancy in the UAE for CBRE. "We predict that hotels in the capital will remain under similar pressure in 2013 as further supply comes to the market."

Despite the disappointing hotels performance, ADNH's taxi and bus division, Al Ghazal Transport, reported net profits of Dh16.4m.

The group's joint-venture catering and cleaning operation, ADNH Compass, which it operates with the UK's Compass Group, reported revenues of Dh763m.

"We are confident of increasing our performance while building profitability and leveraging the synergies between our various business divisions," said Mr Al Ameri.

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