Dubai: Hotels in Dubai started 2015 with a slump in performance. Average daily rates (ADR) dropped 4 per cent in January to Dh1,039.4 from the same month in 2014 as hotel room supply grows in the city, research firm STR Global, said in a report on Thursday.
The fall in ADR and 2.5 per cent decline in occupancy rates to 85.6 per cent year-on-year in January sent revenue per available room (RevPAR-an industry benchmark for performance) falling 6.4 per cent to Dh892.
There are more than 88,000 hotel and hotel apartment rooms in Dubai. By next year, the city is expected to see an additional 20,000 rooms as it prepares to accommodate 20 million visitors by 2020, according to the Dubai Corporation of Tourism and Commerce Marketing (DCTCM).
“Dubai posted declines in all three performance metrics. The drops were in large part because of the exceptionally strong comparable to January 2014, which was the strongest January performance during the last 10 years,” Elizabeth Winkle, managing director of STR Global, said in a statement. She added that there are “downside risks” that the decline in ADR will continue throughout the year.
Similarly, Christopher Hewett, senior consultant at TRI Consulting in Dubai, said hotel occupancy in the emirate in January remained stable year-on-year at 86 per cent. But ADR dropped 4.6 per cent to $384, resulting in RevPAR to decrease by 4.6 per cent as well to $332.
He, however, expects occupancy and ADR to decline by 2-3 per cent this year over 2014, thereby causing RevPAR to drop by 5-6 per cent. This is due to higher hotel room supply, stability in neighbouring tourism destinations and currency fluctuations, he said.
“Based upon our review of the market, we anticipate RevPAR levels will fall between 5-6 per cent in 2015 compared to last year due to a number of factors including increased supply, lower expected demand from Russia and the CIS [Commonwealth of Independent States], the weaker euro, the strengthening US dollar and the revival of neighbouring markets including Egypt,” Hewett said.
However, the downward trend last month was not just limited to Dubai; it was felt by hotels across the country. Occupancy reached 80.4 per cent, a 2.7 per cent drop over January last year, while ADR declined 2.7 per cent to Dh887.59, resulting in RevPAR to fall 5.3 per cent to Dh713.99, as per the STR estimates.
In the wider Middle East and Africa region, hotel performance was slightly better, with occupancy up 1.2 per cent to 62.8 per cent; ADR edging down 0.2 per cent to $184; and RevPAR growing 0.2 per cent to $115.6.
