Jun 21 2012
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Can Dubai check in more hotels?
Hoteliers and industry experts confident sector poised for boom
Thursday, Jun 21, 2012
While it may seem as if Dubai’s hotel industry has reached a saturation point, it’s quite the opposite really, as hoteliers and industry experts alike seem confident this market can check in a further boom in the sector.Dubai’s hotel count at the end of the first quarter of 2012 rested at 577, with the total number of rooms and flats (or hotel apartments) at 75,171, according to the Dubai Department of Commerce and Tourism Marketing (DTCM). Dubai’s hotels reported a strong performance last year, too, with guest nights rising to 32.8 million, marking a 23 per cent increase year-on-year, while total revenues jumped 20 per cent to Dh16 billion.
The Ernst & Young’s (E&Y) estimate reveals that the emirate is expected to add approximately another 4,000 branded hotel rooms this year. “Compared to 2011, which saw very muted hotel development, this number is expected to be much higher reflecting the continued growth in the city,” says Yousef Wahbah, MENA head of Transaction Real Estate at E&Y.Just taking into account pure hotel rooms (excluding hotel apartments), Dubai has 59,381 rooms with over 19,000 rooms currently in the pipeline, “which is 32.8 per cent of the existing supply”, says Elizabeth Randall, Managing Director, STR Global.
“From 2004-2012, more than 26,500 rooms opened in Dubai with more than 18,000 rooms opening in 2008-2010. Post downturn, in 2010 and 2011, demand outpaced supply; demand increased 13.9 per cent in 2010, with supply growth of 11.6 per cent and in 2011, demand increased 17.1 per cent with a 11.6 per cent supply increase in 2011,” she said.Asked if there would ever come a time when Dubai’s hotel sector would explode and it would not be able to take any more hotels, Peter Goddard, Managing Director of TRI Consulting, said: “It is unlikely for an evolving and growing city like Dubai to reach a point of ‘no more hotels’. However, it is conceivable that we may not see supply growing exponentially but the growth will be more in line with the real growth in demand in those years.”
According to STR Global’s Randall, the destination [Dubai] should “continue to attract visitors from its strong existing source markets” and “tap into potential visitors from emerging markets” as access links into Dubai continue to develop and grow.“Earlier, we saw travellers from Europe and the GCC as the main source markets for the UAE but now we are witnessing a rise in Chinese and Indian travellers. Inbound travel from China and India will continue to grow exponentially over the years to come,” points out Guido de Wilde, Senior Vice President and Regional Director, Starwood Hotels & Resorts Middle East.
For this US-based hotel company, the UAE is its biggest market in the Middle East with 23 properties, of which 15 are in Dubai, according to de Wilde. “The growth of Emirates airline and flydubai, and efforts of DTCM are driving growth for the city and making it a stronger market and tourist destination,” he said.Amongst the factors that would fuel this growth in the future is replacing older trodden properties with new ones, according to TRI’s Goddard. “Newer and better properties will need to be built to replace the existing properties which will become old and tired as time passes by, due to physical deterioration and/or lack of competitiveness,” he said, adding that additionally, Dubai’s continued growth will continue to drive growth in economic, demographic and tourism sectors, which will drive the need for more hotels.
The luxury hotel segment in Dubai, meanwhile, has seen “healthy performance” in 2011, according to TRI’s HotStats survey, and has continued to perform better in Q1 2012. The survey, which currently tracks performance of 39 full service hotels in Dubai including luxury properties, indicates occupancies comparable to 2007-2008 levels with occupancy for Q1 2012 for the contributing hotels at 86.8 per cent and average room rate growing by 6.6 per cent over Q1 2010. “These figures indicate solid growth in demand which is expected to support further growth in supply in the coming years,” Goddard points out.
Budgeted for growth?
Meanwhile, in the budget or the economy segment of the market, Dubai is expected to accommodate over 7,000 additional hotel rooms in the next three years, according to Russel Sharpe, Chief Operating Officer of Citymax Hotels. “A 15-20 per cent growth can be estimated for the economy hotel industry alone in 2012-13,” he said.
Echoing his views is TRI’s Goddard as he says that the budget/economy segment of the market is likely to expand in the short term. “Existing [budget] properties are reporting strong demand while the pipeline is relatively smaller compared to the upscale segments. However, the growth in this segment will remain constrained by the very high land prices as developers look for higher yielding real estate options on prime development sites,” he pointed out.
STR Globa’s Randall, meanwhile, says that as the destination develops to a more mature market, “we usually see a diversification” of hotel product catering across all price points from luxury to economy. “As Dubai attracts a higher-spending clientele, the hotels in the upper tiers have a wider pool of demand to draw upon. As new source markets are established with new flight routes, the destination becomes attractive to new and different guests who will have a choice across hotel product offerings,” she explained.
By Shweta Jain Senior Reporter
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