Big market for low-cost hotels in Dubai and Abu Dhabi

Abu Dhabi and Dubai represent a big opportunity for budget hotels, analysts and hoteliers said today, as a number of low-cost operators target the emirates.

The market for budget hotels in Dubai and Abu Dhabi is growing as stopover traffic and low-cost air carriers expand.
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Budget hotels in the Dubai and Abu Dhabi stand to be the big winners from the growth in stopover traffic and the rapidly expanding low-cost carrier business, analysts and hoteliers say.

As a result, there is room for much more budget accommodation in the UAE and the wider region, as the phenomenon of jumping on a cheap flight and taking several short breaks a year, which is now well-established in Europe, starts to take off in the region.

A number of budget properties have launched in Dubai this year, including an easyHotel, and new Premier Inn and Holiday Inn Express lodgings next to Dubai International Airport.

"We will see more traffic coming through this market," said Rob O'Hanlon, the partner for the tourism, hotel and leisure industry at Deloitte in the Middle East. "Provided we're able to capture it there's business to be had."

Abu Dhabi is still undersupplied in the sector, but there are two Premier Inn hotels planned, including one at Abu Dhabi International Airport.

However, in the short-term, the rapid expansion in the budget sector in areas such as Barsha in Dubai has forced hotels into price wars.

Last month, a Citymax hotel, which is retailer Landmark Group's new budget accommodation brand, opened a property with almost 700 rooms opened in Bur Dubai, charging just Dh150 a night. That has now gone up to Dh192. But this is putting pressure on older hotels in the area.

"What you see is now with the new mid-market brands entering the market, that possibly established two and three star hotels that have been for 10 years and longer, it's a wake-up call for them, because they have possibly neglected their up-keep," said Michael Weyland, the general manager of the hotel division at Landmark Group.

He said the launch of such large, more affordable hotels would also help the conferences sector, as well as tourism to the emirate.

"There has been a lot of new supply that has come into the market in a short time and that has put certain pressure on rates," Darroch Crawford, the managing director of Premier Inn Middle East, a joint venture between Premier Inn and Emirates Airline.

But, he explained, compared to more established markets such as North America, Dubai still had some catching up to do in terms of budget hotels,

"There's not a lot of new properties planned. I think there's still more opportunity. What the low cost airlines have done is grow demand. They don't just steal business. They grow business."

Mr O'Hanlon noted that with the growth of low cost carriers it would often be more expensive to fly between Delhi and Mumbai than it would be to fly out of India to Dubai.

"We're just starting to see the rise of the low-cost airlines. Suddenly we're getting a lot of people who have the opportunity to travel. As hoteliers how are recognising potential and making sure we have got the product that people want to buy?"