Dubai: The UAE and Saudi Arabia lead the region in hotel rooms under contract.
The Middle East and Africa has 614 hotels, with 143,870 rooms, under contract, according to the Construction Pipeline Report for June by consulting firm STR Global.
The UAE leads the region, with 17,137 rooms under construction during the month, followed by Saudi Arabia, with 15,415 rooms. The UAE and the kingdom account for 68 per cent of the existing room supply in the region and 70 per cent of the hotel rooms in the pipeline.
Meanwhile, Qatar, Jordan, Morocco, Egypt, Algeria and Iraq have over 2,000 rooms under construction.
With 99,199 rooms under contract, STR Global states that the Middle East has the fastest growing pipeline in the world. It expects existing hotel room supply in the region to grow by 40 per cent. The UAE has seen an increase in hotel room supply over the last year. Dubai, in particular, added over 3,400 new hotel rooms, all within four- and five- star hotel segments, over the past year, according to Yousef Wahbah, head of transaction real estate for the Middle East and North Africa at global consultancy EY.
“If the [17,137 rooms] come through in a short period of time, there will be a marginal decrease in occupancy levels as the supply of rooms outstrips demand,” said Christopher Hewett, senior consultant at TRI Hospitality Consulting.
The rising hotel room supply has had an effect on occupancy rates in Dubai and Abu Dhabi.
According to STR Global data, Dubai’s hotel occupancy rate fell from 78 per cent in May to 75 per cent in June, which is partially due to slow demand in the summer.
Similarly, Abu Dhabi hotels saw occupancy rates fall from 78 per cent in May to around 75 per cent in June, according to Hewett.
Real estate consultancy JLL estimates that 850 additional hotel rooms will enter the Abu Dhabi market by the end of the year. By the end of 2016, around 3,450 rooms are likely to enter the market-the majority of those in the five-star segment- bringing the total supply to 22,300 rooms.
