Dubai hotel rates closing in on Dh1,000 per day

12:19 PM // 0 comments // Unknown // Category: lifestyle Occupancy reaches 86.6% while revenue per available room surges 17.6%Tourism in Dubai is witnessing a massive surge as visitor numbers continue to climb. Dubai hotels are a direct beneficiary of this influx, with average room rates surging almost 9 per cent year-on-year during the first quarter of 2012 to close in on Dh1,000 per day, new data has revealed.
According to STR Global’s data for Q1 2012, occupancy in Dubai hotels rose 8.2 per cent in three months to reach a very impressive 86.6 per cent while the average daily rate (ADR) increased 8.7 per cent to Dh964.86 for the quarter, compared with the same period last year.

This, the global hotels research agency said, boosted revenue per available room (RevPAR) for Dubai hotels by 17.6 per cent year-on-year.

“The majority of markets across the GCC have weathered the recent storms fairly well,” said Elizabeth Randall, managing director of STR Global.

According to the agency, RevPAR of hotels in Jeddah, Al Khobar (both in Saudi Arabia) and Dubai continue to benefit from increased demand this year even as a continuous growth in supply of new hotels and hotel rooms limited RevPAR performances in the other major GCC markets, like Doha (Qatar), where a 10.8 per cent rise in supply led to a 14.5 per cent decline in RevPAR in Q1, 2012.

“We have seen demand growth for most markets in the region, highlighting the stronger underlying fundaments of stability and attractiveness to regional and international visitors,” added Randall.

“Increasing room inventory has been a dominant factor influencing performance in the past and will continue to do so as the region remains attractive for hotel owners and operators. Dubai and Abu Dhabi are interesting case studies to show how hotel markets can cope with balancing demand and supply,” she said.

“The fundamentals in the region, particularly the GCC, are among the best in the world given the combination of oil revenues, official reserves and the contribution of sovereign wealth funds,” said Nenad Pacek, president of Global Success Advisors and an expert on emerging markets.

However, STR Global acknowledged that while Dubai and Abu Dhabi were both experiencing growth, the two UAE markets are at different growth cycles.

“In the UAE, Dubai and Abu Dhabi represent two different cycle stages, particularly when looking at supply growth over the last 15 months,” the STR Global report said. “In Q1 2012, both cities benefited from a fairly similar demand growth, with Dubai growing by 11 per cent and Abu Dhabi by 9.7 per cent,” it said.

Stewart Coggans, regional executive vice-president for Jones Lang LaSalle Hotels emphasised the polarisation of regional markets, stressing the role of Dubai as regional leader in terms of performance.

“The market here is equipped to absorb the 12,000 rooms in the pipeline in the city with a healthy balance of 50:50 in terms of corporate and leisure business,” he said. “Abu Dhabi, with an 80:20 split is not as robust with the 2,000 rooms opening in 2011 leading to a decline in average daily rate of 16 per cent.”

The STR Global report too notes that Abu Dhabi and Dubai vary in potential and performance. “[C]onsidering the supply growth since 2011, the impact on RevPAR performance has been quite different. In Abu Dhabi since December 2011, the city has seen double-digit supply growth, reaching 16.7 per cent in Q1 2012. The additional room inventory resulted in declining occupancy by 6 per cent to 64.1 per cent,” the report noted.

Abu Dhabi’s average daily rate during the first quarter of the year was Dh633.85, a decrease of 11.7 per cent compared to the previous year, data showed, while Dubai hotels continue to experience a healthy growth in room rates.

Nevertheless, it’s Saudi Arabia’s Jeddah that emerged the star performer in Q1 2012. “Excluding Makkah and Medina, both in Saudi Arabia, Jeddah is the star performer in RevPAR growth for the first quarter,” STR Global said.

“The city benefited from demand growth (+17.3 per cent) and a temporary reduction of available rooms as the Westin Jeddah is closed for refurbishment between October 2011 and summer 2012,” it noted.

Al Khobar saw RevPAR in Q1 2012 increase to SAR414.16 (+18 per cent), led by occupancy reaching 57.3 per cent (+13.4 per cent) compared to the previous year.

“Occupancy growth primarily was driven by increased demand (+21.2 per cent) amid fairly low increases in new supply (+6.9 per cent), which in previous years increased by double digits. Elsewhere in Saudi Arabia, Riyadh’s supply growth (+11.5 per cent) in Q1 2012 outpaced demand (+3.1 per cent). This resulted in an occupancy decline of 7.5 per cent to 63.2 per cent,” the report said.

Rest of GCC markets see RevPAR declines

In Doha, occupancy declined by 10.5 per cent to 63.6 percent in Q1 2012, led by double-digit supply growth (+17.4 per cent), which outpaced demand growth of 5.1 per cent, data showed. Heightened competition among hotels in Doha therefore led average daily rates to decline to QAR827.8 (-4.5 per cent) in Q1 compared to the previous year.

“Manama, Bahrain, following the unrest since February 2011, continued to see RevPAR performance declining to BHD35.87 (-9 per cent) in Q1 2012, compared to the previous year,” the agency said, noting that March 2012 saw a huge increase in occupancy (+112.1 per cent), but attributed this rise to a low occupancy base in March 2011 (21.2 per cent). “Demand for the destination improved 1.1 per cent for the first quarter this year,” it said.

Kuwait saw occupancy reaching 57.3 per cent (-6.6 per cent) in first-quarter 2012 compared to the previous year. During the same period, ADR declined by 1.9 per cent to KWD63. Kuwait was the only market reporting a demand decline (-5.0 per cent) for the first quarter.

Whilst ADR declined by 7.3 per cent to OMR94.98 in Muscat, Oman, the city’s hotels saw occupancy reach 67.3 per cent (+3.5 per cent) resulting from increased demand (+8 per cent) for the first quarter of 2012. Muscat’s demand increase outweighed its supply increase of 4.3 per cent.

Overall, revPAR across the Middle East rose 10.4 per cent in the first quarter of 2012 compared to 2011 – 50 per cent greater than Asia and North America.

What’s more impressive is the fact that Dubai’s sustainably strong tourism numbers are not dependent on oil income, something that experts note is highly commendable.

According to Jonathan Worsley, Chairman & CEO Bench Events and Board Member STR Global, the figures underlined two contrasting points for the hospitality industry.

“While oil revenues are sustaining economic growth in the major producing countries and funding development of their travel and tourism industries, we have seen Dubai emerge as a striking example of a market that has thrived and survived with minimal oil reserves but a combination of private and public investment and joint will to balance supply and demand,” said Worsley, who is also the organizer of the ongoing Arabian Hotel Investment Conference 2012.

“Oil rich economies are using their wealth to diversify away from dependency on hydrocarbon revenue. This is very prudent and will benefit them in the long run. However, Dubai’s sustainable model could be adopted by non-oil economies,” he added.