Tuesday, October 10, 2017

Dubai's mid-scale hotel supply goes up 3-fold

The growth of the hotel industry in Dubai continues to move positively upward as the supply of mid-market hotels have increased by almost three fold over the last 10 years, a report said.

The figures, released by leading real esate investment firm JLL in its Dubai Real Estate Market Overview, showed there are currently more than 80 hotels operating in the midscale (3-star) segment, with approximately 15 others under construction and due for completion in the next three years.

The growth of this sector has been a positive reflection of the maturation of the Dubai market, which is opening to a wider range of source markets, but is also likely to result in further declines in average financial returns going forward.

Supply

A further 1,800 keys were added to the market in Q3, bringing the total stock of quality hotel rooms in Dubai to almost 82,200 keys. Notable completions include the Rixos JBR (414 keys), and DoubleTree by Hilton (238 keys) located in Bay Square, Business Bay.

Another trend in the market is the refurbishment of existing rooms, for example the renovation of the Atlantis (Palm Jumeirah), where 1,539 keys were released back into the market this quarter. Despite the recent push towards mid-scale hotels, the supply remains primarily focused on four- and five-star properties.

A potential 4,100 keys could enter the market over the last quarter of the year as several properties are nearing completion in Business Bay including the Renaissance Dubai Downtown by Marriott (312 keys), and Bay Central by Central Hotels (284 keys). Over the next two years, a number of mid-scale hotels are also expected to open with an expected addition of over 15,000 rooms, taking the total number of rooms to over 98,000 by 2019.

Performance

Hotel performance remains under pressure, with the year-to-date August RevPAR (Dh503/$136.9) being the lowest level seen in the last decade. Average daily rates (ADR) also declined 4 per cent to $181 from $189 in August 2016.

Occupancies on the other hand have hovered at a healthy 75 per cent since the beginning of the year. Although the strategy of many hotels across the city is currently focused on maintaining high occupancy levels at the expense of daily rates, it is important to note that Dubai remains one of the strongest performing hotel markets globally in terms of RevPAR and other financial indicators. The pace of decrease in ADRs has slowed compared to previous quarters and the market will eventually achieve a price floor in the short to mid-term.

The decrease in the Dubai hospitality market performance is perceived as an adjustment of the market rather than an indication of distress.

The outlook for Dubai remains positive, especially as the city continues to invest heavily in tourism infrastructure and as it diversifies towards new source markets such as South East Asia. Dubai has seen a 55 per cent growth in arrivals from China, following the relaxation of visa regulations at the end of 2016. - TradeArabia News Service



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