The UAE’s hotel sector, particularly Dubai and Abu Dhabi, will continue to attract investments this year as the industry outlook remains positive, according to analysts.
"Dubai and Abu Dhabi still remain the most active and attractive hotel investment markets in the UAE [as] they do retain the lion's share of total tourist arrivals in the country as well as hotel room inventory," said Amr El Nady, vice president of the hotels and hospitality group at JLL.
Most of the investments will go towards under-construction projects, he said.
“We are at a point in the cycle when some owners are considering that given the amount of new supply on the horizon it is an opportune time to sell, and get good value for the property,” said Matthew Green, head of research and consultancy for UAE at CBRE Middle East. “[But] we never had huge amount of investment volumes here.”
In the Middle East and Africa, the UAE has the largest inventory waiting to come on stream with 40,102 rooms, according to the consultancy STR Global.
Of these, the majority are in Dubai, followed by Abu Dhabi.
But there are few quality properties on the market for sale, according to analysts.
Moreover, “the number of willing sellers is far lower [than mature markets]”, Mr Green said. “A lot of the owners here are holders of property, they are trying to develop family wealth rather than be traders of real estate assets.”
The property consultant JLL expects UAE investors, particularly those with an established track record in hotel ownership, to continue to dominate the landscape.
The sale of Mövenpick Hotel and Apartments in Bur Dubai to UAE-based investors by the Saudi Prince Al Waleed bin Talal’s Kingdom Holding late last month for US$95 million is a case in point.
And in June, a division of Oman’s Bank Muscat made its first overseas investment by acquiring the 294-room Mövenpick Hotel, Jumeirah Beach Residence in Dubai.
JLL had advised on the Kingdom Holding and Bank Muscat transactions.
Five properties, including the two Mövenpick hotels, changed ownership last year with the overall transactions valued at Dh5.2 billion. By comparison, in 2013 hotel transactions worth $16.9bn took place in the United States, according to the Hotel Transaction Almanac from STR Analytics.
“This represents a Dubai record in terms of transaction volume but [it] is insignificant in comparison to established hotel real estate markets,” Mr El Nady said.
Another JLL report released last month showed that of the 32 cities tracked by the company, Dubai was among four, along with Casablanca, Amsterdam and Paris, that hotel investors were eyeing for medium-term returns.
The report also cautions that the emirate needs to build more mid-scale properties and explore new feeder markets to achieve its target of attracting 20 million a year by 2020.
Meanwhile, UAE investors are still keen on investing in overseas hotel projects, especially in Europe, according to Ali Al Hosani, the chief executive and founder of Samaya International. The company facilitates investment in hotel and mixed-use properties in Europe from UAE-based investors.
“The prices of real estate are stabilising [there] and it won’t go down,” he says.
Mr Al Hosani expects to help invest €500m (Dh2.12bn) in Europe this year.
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