Abu Dhabi hotel rates to grow in fourth quarter as major events take place

A slowdown in supply growth resulting in moderate room rate and occupancy level increases will mark the closing quarter for Abu Dhabi's hotels.

A view of the beach from a suite at the St Regis Hotel on Saadiyat Island in Abu Dhabi. Christopher Pike / The National

A slowdown in supply growth will result in a moderate increase in room and occupancy rates at Abu Dhabi’s hotels in the final three months of the year, industry experts said.

The opening of Yas Mall on November 1 and major events such as the Abu Dhabi Grand Prix, National Day celebrations and the Volvo Ocean Race will boost occupancy in the capital.

With room rates across Abu Dhabi still below those of Dubai by approximately 40 per cent, the competitive edge is expected to serve the capital’s hotels well during the festive season.

“The outlook is good, as demand continues to outpace supply. Supply growth, while strong, is lower than in previous years,” said Elizabeth Winkle, the managing director of STR Global.

The progress of big-ticket projects such as the Guggenheim and Louvre museums on Saadiyat Island and new shopping destinations such as Yas Mall that attract families from neighbouring Arabian Gulf countries is expected to support the growth of leisure travel and diversify the crowd away from the traditional corporate clientele.

The average occupancy rate during the fourth quarter is expected to be about 85 per cent at Rotana’s seven hotels and four hotel apartments in Abu Dhabi, a 6 per cent increase compared to last year.

The period “will also show a growth of 3 per cent in the average room rate, with an increase in demand while the level of new supply moderates this year”, said Adrian Deegan, the area director of sales for Rotana Abu Dhabi and Al Ain.

Supply, which increased by 10.9 per cent in the same period, is at a six-year high but the growth rate has cooled down, according to STR Global. Almost 7,350 rooms are in the pipeline for Abu Dhabi compared to 22,093 on the market. Similar to the trend in hotel construction in Dubai, a majority of the rooms in the pipeline – almost 82 per cent – are in the upscale to luxury categories. Almost 60 per cent of the current supply is in the same categories.

The occupancy rate was 73.9 per cent from January to August, up 4.1 percentage points from the same period last year, while the gross profit per available room increased 11.3 per cent, according to TRI Consultants. The average room rate has remained relatively flat at US$143.70, with just 0.1 per cent growth year-to-date over last year, said Rashid Aboobacker, a senior consultant with TRI Middle East.

But the slowdown in the hotel room supply growth rate and an increase in leisure travellers are expected to eventually take the pressure off of room rates.

“There has long been pressure on rates because of a variety of factors – the continuous new supply, negotiated group business that is agreed on in advance and reliance on corporate, government and events business with limited leisure drivers,” Ms Winkle said.

Abu Dhabi hotels have higher occupancy rates from Tuesday to Thursday because of corporate demand, while occupancy rates on Friday, Saturday and Sunday fall below the monthly average by 6 to 7 per cent, she said.

Demand was up 23.9 per cent in the 12 months through to the third quarter, compared to the same period a year earlier, and revenues are up 20.5 per cent – both at a six-year high, according to STR Global.  Room rates grew by 1.4 per cent year-on-year in September, driven by strong group business, Ms Winkle said.

“We are also seeing rate growth for the first five days of October,” she said.

Follow The National's Business section on Twitter