Abu Dhabi to be first choice for hotel developers

With the capital hosting more high-profile events and projects, it is proving more attractive to hospitality investment.

Abu Dhabi is set to replace Dubai as the hotel development destination of choice for investors, with the capital pushing ahead on a range of high-profile events and projects, a report said yesterday. Upcoming events Abu Dhabi will host include the Formula One Grand Prix and the Middle East International Film Festival. The capital is also developing Saadiyat Island, which will be home to the Guggenheim and Louvre museums.

"Like Dubai before it, Abu Dhabi is now taking strategic steps to expand its tourism offer and to attract an increasing number of visitors," Jones Lang LaSalle (JLL) said in its real estate investor sentiment survey report for the Middle East and North Africa. "Due to the planned infrastructure and tourism developments, Abu Dhabi leads the way in terms of potential for hotel investment." JLL's investor sentiment survey showed 24 per cent of investors favoured the Abu Dhabi hotel and hospitality market compared with 19 per cent for Dubai. Saudi Arabia was also popular among investors looking to capitalise on growth in religious tourism.

Abu Dhabi is currently the world's most expensive major destination, with hotel room prices rising 15 per cent year-on-year to Dh1,012 (US$275) on average in the first half of the year, according to last month's Hotels.com hotel price index. "This fact is due to the lack of hotel rooms in Abu Dhabi versus demand, and its importance as a business centre for the Middle East," the report said. Abu Dhabi will add another 3,000 hotel rooms this year to its current supply of 13,000, according to the Abu Dhabi Tourism Authority (ADTA). Seven new hotels will open on Yas Island this month in time for the Formula One event.

Next year, a further 4,000 rooms are expected to become available in the capital. Hilton, Hyatt and Jumeirah Group are among the operators that have new hotels under development in Abu Dhabi. Business tourism accounts for about 80 per cent of the capital's visitors. But the ADTA expects the proportion of leisure tourists to increase as more attractions open up, such as the Ferrari World theme park due to launch next year.

Abu Dhabi is aiming to attract 2.3 million hotel guests a year by 2012, up from 1.5 million last year. "With a significant increase of hotel inventory coming online by the end of the year and over the next two years, it is expected there will be additional pressure on rates generally in this market, as has been experienced in Dubai," said Max Cooper, the executive vice president at JLL Hotels. Dubai, meanwhile, still has the largest share of hotel rooms under development in the region. But the emirate has suffered as a result of thousands of new rooms opening for business this year as global demand for travel has slowed and increased competition has forced hotels to cut rates.

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