Mid-market hotels in Dubai are set to face further pressure on room rates as hundreds of new rooms are added.
Landmark Zenath Group plans to open five four-star properties under the Landmark brand by the end of 2017.
The hotels would require an investment of more than Dh100 million, most of which the Deira-based developer and operator of mid-market hotels is likely to self-finance. Of the five new properties, two are planned for Dubai Investments Park, with a total of 370 rooms. They are expected to open at the end of this year and next year.
A 185-room hotel is earmarked for Mazaya Center on Sheikh Zayed Road by the end of the year, while a 175-room hotel is expected to be completed in Deira by 2017.
A 246-room Fujairah property is also due to open this year, the latest of several recent new hotels in the eastern emirate.
Last month, occupancy at hotels in Dubai fell 15.4 per cent to 63.2 per cent, while the average daily room rate dropped 8.8 per cent to Dh577.85 as supply rose 6.2 per cent year-on-year, according to STR Global.
“Room rates would be affected and the Dubai government is trying to make Dubai more affordable, but competition is also increasing in the mid-market segment, putting a tremendous pressure on room rates,” said Deen Sadiq, the group director at the Landmark Zenath Group. “It would be a buyer’s market for the next four to five years, but upscale properties would be under pressure more.”
The group operates four properties in Dubai under the Landmark brand, Ramada Deira and two hotel apartment development in Jeddah.
In its half-yearly results published Thursday, London-listed InterContinental Hotels Group (IHG) reported weaker business in the UAE despite a 9.9 per cent growth in Saudi Arabia. It did not provide further details.
IHG manages 25 hotels, accounting for nearly 6,000 rooms, in Saudi Arabia under brands such as InterContinental, Crowne Plaza and Holiday Inn, and plans to open more than 7,700 rooms across nine hotels in the country over the next three to five years, said Pascal Gauvin, the chief operating officer for India, Middle East and Africa at IHG.
IHG’s operating profit rose 9 per cent in the first half ending in June to US$337m.
The French hotel company Accor, which also released its earnings on Thursday, reported weaker trade in Saudi Arabia and the Arabian Gulf countries because of Ramadan. Its first-half net profit was up by 68 per cent to €91 million (Dh365m).
Starwood Hotels and Resorts Worldwide, which operates the Sheraton and Westin brands, reported an 11 per cent fall in quarterly profit to $136m because of a strong dollar. It earns most of its revenue from outside the United States.
In the Middle East and Africa region, it reported a 6.2 per cent dip in average room rate to $183.70 in the second quarter while occupancy rates decreased by 1.4 percentage points to 62.5 per cent. Its revenue per available room, a measure of a hotel’s profitability, decreased by 8.2 per cent to $114.93.