Hotel room additions in Dubai likely to force down rates

In January, average room rates in Dubai fell 3.6 per cent from a year earlier to about Dh1,070, according to the consultancy STR Global.

At least 80 new Dubai hotels are currently in the development pipeline, accounting for 22,332 rooms. Lee Hoagland / The National

Dubai hotel stays are set to become cheaper as the addition of more than 22,000 new rooms forces operators to cut rates.

In January, average room rates in the emirate fell 3.6 per cent from a year earlier to about Dh1,070, according to the consultancy STR Global. Average occupancy rates also dropped by 2.9 per cent to 85.6 per cent. That pulled down revenue per available room, a key hotel industry measure, by about 6.4 per cent to Dh916.

The strong US dollar, to which the dirham is pegged, is also hitting tourists from the euro zone and Russia in the pocket.

Despite the fall in prices, more supply is scheduled to come on stream, piling further pressure on room rates. At least 80 new hotels are currently in the development pipeline, accounting for 22,332 rooms.

The French operator Accor is one of the big international hotel chains that are investing heavily in the emirate. It plans to open Adagio Aparthotel Barsha by next month and Ibis Styles Dragon Mart by August. It already operates 16 hotels in the emirate and expects to have 3,000 rooms in the UAE before 2020 – about 2,000 of them in Dubai alone. An extension to the World Trade Center Ibis hotel will add 588 rooms in the first quarter of next year.

“We hope the dollar will weaken a bit against the euro to ensure the second half of the year will get a little better in terms of tourism from Europe,” said Olivier Hick, the vice president of operations in the Arabian Gulf and Levant regions for Accor.

Dubai currently has 90,000 hotel rooms, and expects to add 20,000 rooms by 2016 with Expo2020 the main driver.

“The new capacity might improve the value for price that we are getting in Dubai today. The prices have softened, so it might be a better opportunity for the Saudi and Indian markets to be in Dubai at a more affordable rate,” added Mr Hick.

The euro has lost about 14 per cent against the dollar over the past 12 months. That is thought to have affected the spending of tourists from key euro-zone source markets such as Germany.

Still, some tour agencies have played down the impact of a weak euro on Dubai’s hotel sector because of its unusually diverse make-up supported by the growing international hub status of the city’s main airport.

“The fall of the euro has been gradual, unlike that of the rouble, and it is not likely to have any immediate impact,” said Ahmed Riza, the corporate leisure manager Amex at Kanoo Group in Dubai. “Though on the corporate side, people might be more cautious about their spend.”

Dubai International Airport this year overtook London Heathrow as the world’s busiest by international traffic. Full year passenger numbers rose 6.1 per cent to more than 70.475 million in 2014, according to airport data.

Dubai is the world’s fifth-largest tourism destination by total visitor numbers, after London, Bangkok, Paris and Singapore.

London was expected to attract 18.69 million international visitors last year, compared to Dubai’s 11.95 million, according to MasterCard Global Cities Index report in July.

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