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Will Dubai hotel rates continue to plummet?

Your next trip to Dubai will be easier on your wallet as hotel rates continue to decline across the emirate, falling as much as 10 per cent as compared to last year.

Average prices of hotel rooms across Dubai fell nearly 10 per cent in March 2017, as an increase in accommodation supply put pressure on hoteliers, according to the latest figures released by hotel industry research firm STR.

In March, hotel room supply in Dubai posted a 6 per cent increase, as more newly completed projects were delivered into the market, putting pressure on operators to offer attractive rates in a bid to keep bookings up.

Preliminary data from showed average daily rates (ADR) fell 9.8 per cent in the emirate compared with the previous year, with the average night costing guests AED756.21.Hoteliers’ revenue per available room (RevPAR) consequently dropped 11 per cent to AED652.61.

The report said: “Average Daily Rates continue to be pressured by new supply entering the market.”

While more rooms are expected to come on stream, Dubai’s current stock of accommodations is high by global standards. According to travel site Insider Monkey, the emirate has 100,000 hotel rooms available for visiting guests, the ninth highest globally, on par with New York and Chicago.

The hospitality sector has seen new hotels opening up recently, with at least 5,500 rooms entering the Dubai market since the beginning of 2016.

The latest statistics, however, indicated that Dubai continues to attract a huge volume of guests, especially during major events. According to STR, average occupancy levels in the emirate are still high at 86.3 per cent, though slightly down by 1.3 per cent compared to a year earlier.

The report said: “Demand was boosted by events like Global Forum for Innovation in Agriculture, Arablab, The Expo 2017 and Dubai International Humanitarian Aid and Development Conference and Exhibition.”

Hoteliers had earlier confirmed that demand growth is not keeping pace with rapid expansion in inventory. According to a source in the hotel industry, the delivery of additional hotel rooms has prompted operators to adjust their rates, to cope with the supply-demand imbalance.

New developments

French hotel group, AccorHotels, has announced the extensive overhaul of a former Sheikh Zayed Road landmark into the Mercure Dubai Barsha Heights Hotel Suites & Apartments. The property is in the middle of a two-phase comprehensive refurbishment and is anticipated to open under the Mercure brand on May 19, 2017.

Upon opening, the 1,015 room hotel will be the largest Mercure property in AccorHotels’ global portfolio.

As part of the first phase of renovation, 120 hotel rooms will be revamped to fit Mercure brand dimensions. The second phase of renovation will focus on enhancing additional guestrooms and facilities to meet AccorHotels’ standards and will bump the hotel up from a four star to a five-star hotel in the form of suites, the company said in a statement.

The apartments will also be refreshed and reintroduced to the market. The second phase of renovation and refurbishment is expected to be completed by the end of 2018.

Future outlook

According to Alpen Capital Hospitality Report, the GCC’s hospitality market is expected to grow at a 7.6 per cent CAGR from an estimated $25.4 billion in 2015 to $36.7 billion in 2020. Despite a challenging period last year and a weak average rate environment in 2017, the market is likely to recover in the long-term, driven by rise in tourist arrivals stemming from upcoming mega events and government efforts.

The GCC region holds one of the largest hotel development pipelines in the world. Driven by the bright prospects of the tourism industry and government support, international hotel chains as well as domestic players have laid down robust hotel and serviced apartment development plans.

Dubai is likely to witness an addition of nearly 57,000 rooms in hotel and serviced apartments in the five years to 2020, whereas Saudi Arabia has a pipeline of over 47,000 rooms. Addition of such massive capacity is expected to extensively scale up the region’s hospitality sector. Large-scale international events, upcoming tourist attractions, and a growing MICE market are likely to accelerate tourist arrivals to the GCC region. International tourist arrivals to the GCC are anticipated to grow by 5.7 per cent annually in the next four years to 2020, Alpen said.