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Business hotels are on investors’ radars

Out of the 20,000 rooms in the UAE pipeline, 6,500 rooms are planned for Dubai.

Gulf News

Dubai: Investments for five-star corporate-focused hotels on Shaikh Zayed Road (SZR) are on the rise, according to a study by Christie and Co. and STR Global, hospitality consultancy firms.

Investments were “primarily on SZR — the area from the World Trade Centre to Defence Roundabout; but more recently they have extended all the way to Mall of the Emirates and, to a lesser extent, past Jebel Ali,” said Samson, managing director Mena of Christie and Co.

Corporate-focused or business hotels are more work-oriented than leisure-focused alternatives. They are equipped with the facilities to provide business visitors with a working environment, as well as an environment to help them relax and escape the pressures of work.

Business hotels that are set open this year on SZR include The Oberoi, which is scheduled for the first quarter, and Hilton’s Conrad Dubai, which is planned for the second quarter.

“While Shaikh Zayed Road is considered the prime area for investments for this kind of hotels, Business Bay is emerging as another desired destination,” Samson said.

Given the paucity of retail outlets and offices in Business Bay, the area is lacking in infrastructure, which can render it unappealing for visitors, said Samson. The downsides of the area are apparent as some projects have either been cancelled or stalled, he added.

However, he says “Business Bay has lots of potential.” And it is already showing signs of improvement.

“A significant amount of work has been done on infrastructure,” said Peter Goddard, managing director of TRI Hospitality Consulting. He expects that Business Bay will take full shape by 2015.

Meanwhile, Al Barsha is emerging as a sought-after location for the mid market range, with a three or four star rating, according to Goddard.

A number of business hotels are expected to be operational within the next three to five years, said Samson. He did not disclose the exact number or names of the properties.

There are 20,000 rooms in the UAE pipeline; of which, 6,500 rooms are planned for Dubai this year, the study highlighted. But STR reckons that there are 4,384 rooms planned for Dubai this year.

“In 2012, 3,600 rooms entered the market- the value was around $1 billion. Over the next 3 years, there will be around 7,000 rooms,” said Chiheb Bin-Mahmoud, executive vice president at Jones Lang LaSalle (JLL).

The UAE’s growth, in terms of projects planned an underway, rebounded after the first quarter 2010 with a six per cent year-on-year increase, rising to $614 billion, Gulf News reported earlier this month. In November, the UAE’s early stage projects stood at $199 billion.

The rebound was driven by large-scale projects, such as the Mohammed Bin Rashid City, a leisure and entertainment destination that will boast the world’s largest shopping mall and 100 hotel facilities.

The market has maintained steady growth in the last three years, and this trend is expected to continue to this year, said Christopher Hewett of TRI Hospitality Consulting.

Hotel occupancy rates in Dubai rose from 77 per cent in 2010, to 80.3 per cent in 2011, and to 81.1 per cent in 2012, and this year it is expected to make a strong finish at 82 to 83 per cent, according to statistics provided by TRI Consultancy.

Sarah Algethami is a trainee at Gulf News.