Dubai hoteliers trim room rates amid increasing supply

'Dubai is now an affordable destination and room rates are not going to be as high as last year,' said Mansur Mehta, the chairman of Suba Group of Hotels.
Dubai had 85,596 rooms from 403 hotels at the end of August, up from 83,911 rooms from 397 hotels at the end of June, according to STR. Satish Kumar / The National
Dubai had 85,596 rooms from 403 hotels at the end of August, up from 83,911 rooms from 397 hotels at the end of June, according to STR. Satish Kumar / The National

Dubai hotels continued to slash their room rates last month as an increase in supply put pressure on hoteliers.

The average occupancy rate rose 3.4 per cent during the month compared to last August to touch 76.1 per cent, according to data from research company STR.

The increase failed to slow the decrease in average room rates across the emirate that fell 10.2 per cent to Dh515.22. The drop led to a decline of 7.1 per cent year-on-year in revenue per available room, a key measure of a hotel’s profitability, to Dh392.03. Demand for hotel rooms rose by 9.2 per cent year-on-year last month, as supply rose by 5.5 per cent.

The average occupancy rate and the average daily rate are expected to decline in Dubai during the fourth quarter, according to STR.

Room rates have been falling in Dubai for the past year as more hotels come onto the market.

“The volume of visitors are going up as Emirates and the Government of Dubai are doing a great job in promoting the destination, but the rates are down as there is a cut-throat competition with more hotels opening up,” said Mansur Mehta, the chairman of India’s Suba Group of Hotels that opened its four-star Suba Hotel in Deira in 2014. “Dubai is now an affordable destination and room rates are not going to be as high as last year.”

Suba Hotels has put on hold its expansion plan until rates start to show a positive trend.

For the past weekend in Dubai, rooms at the five-star JW Marriott Marquis in Business Bay rooms started at Dh646 a night. Those at Sheraton Jumeirah Beach Resort start at Dh580 a night, while at the Conrad Hotel on Sheikh Zayed Road the rooms start at Dh599 a night.

As five-star properties slash their room rates, the pressure is on budget properties.

“During the last eight months of the year, the rates have fallen by 35 per cent to even 50 per cent compared to the same period last year for the hotels,” Mr Mehta said. “The visa on arrival to Chinese tourists, the business events and the theme parks would continue to attract tourists, but it won’t help the rates due to the supply in the market.”

Dubai had 85,596 rooms from 403 hotels at the end of last month, up from 83,911 rooms from 397 hotels at the end of June, according to STR. It has 44,549 rooms from 153 properties in the pipeline until 2022, STR said at the end of June.

At the Steigenberger Hotel Business Bay that opened last November, the occupancy rate is expected to stay above 80 per cent during the last quarter, said Adeeb Ahamed, the managing director at Twenty14 Holdings, which owns the property.

The number of Dubai visitors are expected to climb for the rest of the year given the new theme parks and business and entertainment events scheduled.

“The IMG Worlds of Adventure theme park and Dubai Parks and Resorts, which is opening in October, will propel the tourism sector for the rest of the year in Dubai,” according to Sharif Rahman, the chief executive of International Expo Consults, organisers of trade exhibitions Dubai Entertainment Amusement and Leisure Show 2017. “Several industry exhibitions are slated for the coming part of the year and the UAE has the best of both worlds, be it indoor or outdoor theme parks. The country is experiencing this exponential growth because of its quality infrastructure.”

In the first seven months of the year, Dubai received 8.37 million tourists, up 1.7 per cent from 8.23 million a year earlier.

The Dubai World Trade Centre expects to attract 1.2 million regional and international visitors to its 100-plus scheduled exhibitions, conferences, trade and entertainment events in the next four months through December.

ssahoo@thenational.ae

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Published: September 14, 2016 04:00 AM

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