Business | Tourism

Abu Dhabi set for a massive hotel boom

Oversupply to affect occupancy rates and room rates this year

  • By Samia Badih, Staff Reporter
  • Published: 00:00 July 11, 2012
  • Gulf News

Tourists at the Abu Dhabi Corniche
  • Image Credit: Gulf News archives
  • Tourists at the Abu Dhabi Corniche. With hotel oversupply affecting both average occupancy rates and average room rates this year, there is expected to be a drop in prices. However, the more upscale hotels are likely to take a stronger stand on rates.

Abu Dhabi: About 20 new hotels are expected to open in and around Abu Dhabi city over the next three years, according to TRI Hospitality Consulting, a Dubai-based company which provides hotel consultancy services.

Among them, there will be at least five Marriott hotels, including a 60-room Marriott Exclusive Apartments, a 195-room Courtyard by Marriott in the Central Market, a 244-room Edition hotel, also a Marriott brand, and a 532-room Ritz-Carlton, one of Marriott’s luxury brands.

Other additions include five new properties by Rotana, including two in the Capital Centre, the development around Abu Dhabi National Exhibition Centre, a 414-room Centro Rotana Capital Centre opening this year and a 300-room Capital Centre Rotana opening next year.

Also announced is a 400-room Saadiyat Rotana Resort for 2015 and a mammoth 600-room Arjaan next to Marina Mall, according to TRI Hospitality Consulting data.

It’s a market that analysts believe will continue to suffer from oversupply until demand starts to catch up.

According to the Abu Dhabi Tourism & Culture Authority (TCA) Abu Dhabi, the number of rooms available has increased by 13 per cent since May 2011, with hotel occupancy in May reaching 63 per cent whch is a seven per cent slip on last year.

Total hotel revenue surprisingly increased three per cent on May 2011, the TCA Abu Dhabi reported.

“The problem in Abu Dhabi is... it’s got an oversupply,” said Peter Goddard, managing director of TRI Hospitality Consulting in Dubai.

It’s a situation that he says will probably affect both average occupancy rates and average room rates this year. “In order to attract people you’re going to drop your rates,” he said.

According to TRI, since January of 2012, hotels have seen ARR (average room rate) and RevPAR (revenue per available room) fall by 16.5 per cent and 15.6 per cent respectively resulting in a 20.8 per cent fall in profitability (GOPPAR, or the gross operating profit per available room).

“We do not envision the situation to improve in the capital in the near future as corporate and conference demand continues to slow on the back of lower business activity, especially in the wake of the continuing European debt crisis” said Goddard.

Ruprecht Schmitz, General Manager at Millennium Hotel Abu Dhabi, said that despite the increase in the number of rooms in the market, the rates are expected to stay in the same region as last year. “Naturally becaue of the increase of availability and new openings and the room stock in Abu Dhabi, there’s slight pressure on the rates,” he said.

Michel Koopman, Director of Operations Middle East for Anantara Hotels, Resorts & Spas and General Manager, Eastern Mangroves Hotel & Spa by Anantara, had told Gulf News at the time of the opening that the market is going to be tough. “We know the numbers and you know the numbers,” he said.

Goddard said that the hotels at the end of the day won’t be making as much as they used to, with the more upscale ones taking a much stronger stand on rates. “If they drop their rates it’s going to affect their overall perception.”

While it’s generally easier to make more money in the hotel industry than it is in other parts of the world, Goddard said that a tough market in Abu Dhabi only means that the new hotels will now have to expect their return on investment to take longer than what it used to a few years back.

 

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