|22 January, 2020

UAE hotel business to pickup in 2020 after posting RevPAR losses

Decline in average daily room rate to 'neutralise' this year, says Colliers

Image for illustrative purpose. A woman walks with a baby stroller in a hotel lobby in Dubai.

Image for illustrative purpose. A woman walks with a baby stroller in a hotel lobby in Dubai.

REUTERS/Jumanah El-Heloueh

Hotels in the UAE are likely to see an uptick in business this year after posting losses in revenue per available room (RevPAR) in recent years, according to the latest analysis.

The full-year forecast by Colliers International showed that the decline in RevPAR for hotels in Dubai will slow down to between 0 percent and -1 percent in 2020. In the previous year, hoteliers incurred huge RevPAR losses, which ranged between -7 percent and -12 percent.

Hoteliers have come under pressure due to the huge influx of new rooms and increased competition in the market. Operators were left without a choice but to cut their room rates to keep their rooms occupied, thereby dragging down the RevPAR, a key performance metric in the industry.

James Wrenn, senior manager for hotels at Colliers International in the Middle East and North Africa (Mena) said things may improve this year because the World Expo will boost tourist numbers in the country.

“This year, we expect the slowdown in ADRs to neutralise, and with the Expo coming to Dubai in Q4 2020, we are hopeful of a pickup in business and an increase in visitor numbers especially in the latter half of the year,” Wrenn told Zawya.

However, Wrenn pointed out that UAE hotels are still doing well, with occupancy levels hitting as much as 84 percent at some properties.

“Occupancies have remained relatively robust, illustrating the strength in visitor numbers to Dubai and its position as a key global city,” said Wrenn.

According to a report by Knight Frank, the UAE hospitality sector’s performance has suffered a slump despite increasing tourist traffic, an indication that the subdued numbers have nothing to do with occupancy issues. “Hotels have had to price more competitively in order to maintain market share,” it said.

Figures released by STR showed that hotels in UAE have been suffering RevPAR losses since 2014. “Hotel rooms are being competitively priced in an effort to stimulate demand and keep up with accelerating room supply. This has been a common trend among the majority of key markets in the Middle East since the drop in oil prices in 2014,” STR said.

Most-booked hotels this year

According to Colliers’ forecast, hotels in Dubai Marina and Jumeirah Beach Residence (JBR) will see the highest occupancy levels this year, averaging at 84 percent.

Properties in Dubai Creek, Festival City, Shaikh Zayed Road and Dubai International Financial Centre (DIFC) will also be popular, with occupancy levels expected to average 80 percent this year.

Hotels in Ras Al Khaimah beach are likely to see 76 percent occupancy, while those in the city centre will likely record an occupancy rate of 75 percent.

Overall, the average occupancy rate for UAE hotels will be 73.1 percent, while the average ADR will be less than 200 UAE dirhams.

According to published reports, more than 56,000 hotel rooms will be added into the market in 2020. While the number of hotels is set to expand, the UAE is expected to welcome 25 million people who will be attending the World Expo event this year.

The number of visitors to Dubai alone went up 5.1 percent to 16.7 million in 2019.

(Writing by Cleofe Maceda; editing by Seban Scaria)

cleofe.maceda@refinitiv.com

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© ZAWYA 2020

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