Tourists flock to beach hotels

Beach hotels lead sector resurgence showing positive growth in both occupancy and revenue per available room

Tourists are flocking to Dubai's beach hotels in a sign that the emirate's hospitality industry may be levelling out, says Jones Lang LaSalle. Hotels last year suffered sharp falls in occupancy and room rates amid stiff competition for guests as more lodgings opened and demand declined amid the global economic downturn. The hotels and tourism industry accounted for 19 per cent of Dubai's economy in 2008, the Dubai Department of Tourism and Commerce Marketing reported.

"The hotel market is closest to the bottom of cycle and is showing signs of recovery with beach hotels leading the way, showing positive growth in both occupancy and revenue per available room," analysts at Jones Lang LaSalle said in a report. Dubai's beach hotels, which include The Westin, the One & Only Royal Mirage and other resorts along the emirate's northern coastline, have seen 0.6 per cent growth in revenue per available room in the first quarter of this year compared with the same period last year.

Occupancy was up 9.2 per cent, while rates fell 7.9 per cent. The average room rates at Dubai's beach hotels are double those at properties elsewhere in the city. Compared with early 2008 levels, however, revenue per available room for the beach hotels is down 22 per cent. That reading is an important gauge of the economic health of hotels. At Dubai hotels, occupancy levels have also improved this year as prices have fallen, the report said.

"The great thing about the beach hotels in Dubai is while they offer some exceptional leisure opportunities, a number of them are also close to a lot of the business facilities, which allows them to typically outperform the other properties in Dubai," said Blair Hagkull, the managing director at Jones Lang LaSalle in the Middle East and North Africa. The pricing at the hotels was also very attractive compared to the previous years as operators focused on attracting guests to their properties after a difficult time last year, he said.

Derryn French, the director of communications for Le Meridien Mina Seyahi and The Westin Dubai, said: "We pretty much have been running at full occupancy at both hotels." Some extra business had been picked up as a result of flight cancellations caused by ash spewing from an Icelandic volcano, but Ms French said this month would have been good even without the windfall. Hotels in Dubai benefit from the Easter break early this month, when tourists from the UK swarm their sunny beaches.

"We were looking very strong, with occupancies [at above 90 per cent]," Ms French said. "April has traditionally been a good month." Christian Muhr, the general manager of Hilton Dubai Jumeirah, said his hotel was busy in the first three months of the year. "Our average occupancies for quarter one exceeded 90 per cent," he said. "In fact, our hotel has seen a rise in leisure traffic from within the GCC this year compared to 2009."

The Jones Lang LaSalle report also said that office rents were under pressure in some locations and that the citywide vacancy rate had increased to about 35 per cent. The vacancy rate could exceed 45 per cent this year as office buildings opened, it said.