Delays to hotels may be a blessing

Construction delays red tape and financing have played a part in delaying several hotel projects in Dubai, which analysts say may not be a bad thing.

Powered by automated translation

Construction delays red tape and financing have played a part in delaying several hotel projects in Dubai, which analysts say may not be a bad thing. The glut of extra rooms would have only exacerbated the decline in revenues caused by the lower demand that accompanied the global tourism downturn.

"Delays in opening can be caused by a myriad of factors in completing the construction, fit out, licensing and staffing of the property ready for it to commence trading," said Chiheb ben Mahmoud, the senior vice president at Jones Lang LaSalle Hotels. "It could be in the interest of all parties that opening is reasonably delayed, given the current state of the market." Hotels that failed to open as scheduled this year include: the Ritz-Carlton, planned for the Dubai International Financial Centre; the region's first easyHotel in Jebel Ali; the Armani Hotel at Burj Dubai; and the Sofitel at Jumeirah Beach Residence. The Essque Hotel and Spa had its opening pushed back from this year to next.

Several projects on the Palm Jumeirah have also been pushed back. No hotels have opened on the man-made island since the launch of the 1,539-room Atlantis last year. "I think the Palm Jumeirah took a hit with the delay to the Trump Tower," said Sanjana Gandhi, an independent Dubai-based hospitality consultant, adding that financing became more difficult for developers as the downturn began to bite.

Construction on the Trump International Hotel and Tower, which was to be the centrepiece of the Palm Jumeirah project, was suspended indefinitely after Nakheel, which was developing the property, halted work at the end of last year. "That was one big sign of how hospitality was going in Dubai, because they made such a big issue about it and it was probably one of the most recognisable properties that was going to come on-board," said Ms Gandhi.

Hotels that were scheduled to open on the Palm next year include the Ottoman Palace, Essque Palm Jumeirah, Royal Amwaj and Oceana. The Royal Amwaj had an opening scheduled for early next year postponed until later in the year. That is by no means the end of the list of stalled developments. When construction work was announced for the Fairmont Palm Hotel and Resort, the plan was to complete the project this year. It will not open until 2011.

"We have gone through a process of value engineering and design to ensure that our project is perfect for the market in which we are operating," said Piaras Moriarty, the vice president of client management of IFA Hotels and Resorts, the owner of the Fairmont property and one of the largest foreign investors on Palm Jumeirah. "That project was originally a little bit larger - there were more rooms. We are now in the process of redesigning."

The Kingdom of Sheba hotel, another project being developed by IFA on the Palm, was also delayed as it awaited a redesign, Mr Moriarty said. A new opening date has not yet been finalised. More openings could impact already negative recent hotel industry statistics. Revenue per available room, a key measure of the health of the sector, has fallen 33.8 per cent in Dubai to US$155.36 (Dh570) this year to the end of October compared to the same period last year, the consultancy STR Global said.

Many of Dubai's hotels were planned during the boom period. Figures from the US research firm Lodging Econometrics show that the hotel development pipeline for Dubai is at 113 projects, or 47,142 rooms, with average project size at 417 rooms, the highest for any market in the world. The Armani Hotel, which is located in the Burj Dubai, the world's tallest tower, was planned to open with the launch of the tower next month. With the building's launch now delayed to January 4, a new opening date for the hotel has yet to be announced.