Global slump hits UAE launches

This lack of news comes against a background of a worldwide 60% slump in hotel transactions over the past year as finance for the biggest deals was hit by the credit crunch.

Two years ago new hotel launches at the landmark industry event ran past the one hundred mark. This week the conference boasted more attendees than ever, and radiated confidence about the future of the many previous hotel launches that are now preparing to open their doors.

However, only one new hotel was launched in Dubai this week: a modest low-budget easyHotel being developed by Nakheel in the Jebel Ali Free Zone.

Abu Dhabi’s Aldar Properties did hit the headlines with its plans for 40 hotels in the emirate. But there were no mentions of specific new projects, just a statement of a broad target for hotel numbers on existing mega projects.

‘We will have 40 hotels by 2015, and all of them in Abu Dhabi,’ managing director of Aldar Hotels & Hospitality, Paul Bell told AME Info. ‘We have five mega projects but we are keeping to an average of 250 rooms per hotel as our tourism objective is high-end. The Ritz-Carlton is one we have already announced and there will be more over the next six months.’

Bawadi

It could be that even the ambitious Dubai has currently got enough on its plate with present developments. It was, after all, only last year that the 10-kilometre Dubailand hotel strip, Bawadi, announced plans to more than double total investment to $55bn for 51 instead of 31 hotels.

Ground has been broken on the signature 6,000-room Asia-Asia hotel, set to be the biggest in the world when it opens in 2012, not 2010 as first advertised, as well as the Desert Gate hotel at the entrance to the air-conditioned hotel zone.

So, if the Dubai hotel bubble has not exactly burst, it is no longer getting any bigger. Bawadi CEO Arif Mubarak told AME Info that a revision of detailed design work had held up the signature hotels but that the development was now moving ahead.

Financial crisis

Worldwide, the hospitality industry has been seriously hit by the credit crunch and a slowdown in lending by the global banks. The deal flow continues but mainly for smaller projects and the absence of big private equity transactions has resulted in a total reduction of 60% in the value of worldwide hotel deals.

Professional advisers to the sector say the problem is that lenders are rebuilding their own capital reserves after sustaining big sub-prime losses and are just not prepared to lend on the same scale. They hope that this will be a temporary phenomenon but are far from sure.

Fortunately for the UAE its hotel developments are largely equity financed from retained profits. But there is always an element of finance in most projects, and if the global economic crisis continues this may impact on the speed of hotel roll-outs and possibly result in a more cancelled projects.

Meanwhile, Dubai Government is committed to investing 40% of the cost of the first phase of Bawadi for the three signature hotels as well as the huge infrastructure for the 10-kilometre strip; and neighbouring Abu Dhabi shows no sign of slowing down. But the constant expansion of UAE hotel projects seems to be drawing to a close.

See also:
American tourists turn to Gulf hotels
Islamic hotels spread beyond GCC