As Dubai’s hotel occupancy rates continue to spiral downwards, most hoteliers are remaining defiantly optimistic about the future, despite a worryingly high percentage decline and the obvious over-saturation of the marketplace. As with every sector, supply and demand is of paramount importance to any kind of long-term stability for the hotel industry, but Dubai has seen 9,000 new rooms enter the market in just 12 months.
This has resulted in a 2.2% decline in occupancy (although the overall occupancy figure does still sit at 85.7%, one of the highest in the world), with the average daily room rate taking a 6.1% hit in comparison with this time last year. The research, compiled by STR Global, also significantly revealed that the key performance indicator for hoteliers – revenue-per-available-room (RevPAR) was down 8.1% compared to 12 months ago. Any industry would be concerned by a year-on-year revenue decrease of 8.1% you’d think, but Dubai’s hoteliers appear unmoved.
A Little Bit of Difficulty
Although one CEO of a high profile hotel chain was able to bring themselves to admit that Dubai’s hotel industry must take this 12-month long decline as something of a “reality check”, other’s were not so quick to admit there is potentially a serious situation developing.
Quotes from other high profile Hotel CEO’s include some of the following:
“It’s a little bit of difficulty but we are still the best in the world.”
“It’s a bit of a bumpy ride but we remain strong.”
“It’s a lot of hotels coming up; to fill them is not difficult.”
“I’m not worried about crazy over supply.”
“Dubai has time and time again proven the sceptics wrong.”
So although on average a Dubai hotel may find themselves with around 15% of their rooms unoccupied, don’t expect to be able to check-in to the Burj al Arab, The Atlantis or The One & Only on the cheap for a weekend change of scenery. They’d rather have it empty than offer last-minute discounted rates. In fact, we found that the rate for the One & Only on the Palm is 1500AED cheaper if you book it for a month’s time rather than for tonight. Seems a touch odd to us, but hey…
The weak state of the industry in comparison to 12 months ago has been attributed not to the pricing structure, but the apparent rejuvenation of other Middle Eastern tourist hot spots like Egypt and Lebanon, although you would imagine their market appeal is pretty far-removed from the opulence and excess offered so readily by Dubai. Also a factor is the weakening rouble amid the ongoing sanctions imposed upon Russia, meaning that rich Russians are tending to stay at home rather than come and stock up on their designer fur. We actually thought that only affected the Kempinski Hotels, but apparently other chains are citing this as the number one issue for them too.
One short-term positive for Dubai’s established five star residencies is that most of the new high-profile hotels due to open are, as always, way behind schedule. The Marina 101 for example, was supposed to open its doors in 2012. This was put back to late-2014, and then early 2015. No word has come out yet about the fourth date revision.