Dubai: The hotel sector in Dubai is getting ready for a lot of action – and it’s not only about keeping the rooms and suites ready to take in more guests. There is a lot of action happening in terms of new hotel projects being delivered, in what industry sources say could be the ‘next golden age’ for the industry.
Check these out.
* A 1,000-room hotel – and what will be the world’s tallest such – opening in first-half 2024. Located in Dubai Marina, the 365-metre high ‘Ciel’ is from The First Group, who’s been busy through the years with building hotels in the city. (By the way, Dubai already hosts the world's tallest hotel towers.)
* Before Ciel's opening, another record-holder, the One Za’abeel will have its hotel tower ready under the ‘One&Only’ super-luxury branding by year-end. (The project gets its place in the Guinness World records courtesy of having the tallest cantilever.)
* And just recently, there was the Atlantis the Royal becoming Dubai’s latest’s destination resort, with quite a unique take on its architecture design and with the elevated range of experiences associated with the name.
So, how fast can Dubai build new hotels? And equally important, how soon can the hospitality market absorb all of the new rooms?
“Dubai has reached critical mass - Brand Dubai is well-established and highly sought after,” said Faisal Durrani, Partner and Head of Middle East Research at the consultancy Knight Frank. “Dubai boasts amongst the highest concentration of hotel rooms in the world at 140,000 keys - and incredibly, occupancy levels are also routinely world-leading.
“Dubai Airport too is now on course to surpass pre-Covid levels, cementing its place for 15 years running as the world’s busiest international hub.”
The UAE hotel market is well-placed to welcome new hospitality concepts. For example, the 25hour Hotel Dubai One Central attracts huge crowds with its unique value proposition. It is unlike a traditional hotel, yet it has gained popularity among residents and visitors alike
On top of those 140,000 rooms, around 36,000 new ones are planned or under construction. As is to be expected, the majority of these are in the five-star city hotel/resort category, with Dubai South and Expo City likely to see more of them as they emerge as mixed-use hotspots.
Build and meet instant demand
Developers of hotels are hoping that this demand – whether for business or pleasure – in Dubai stays on for far longer than the average market cycles. This is where geopolitics - and how it is playing out these days - could help them.
“Fair to say that the global geo-political situation has given the UAE, and more specifically Dubai, an incredible boost to the economy in pretty much every sector across the board,” said Philip Wooller, Area Director, Middle East and Africa at hospitality consultancy STR.
“Even though hotel supply increased by 25,000 rooms since 2019 (and 36,500 since 2018), demand has kept pace.
“Dubai is currently the most popular city in the world and the hotel performances confirm this. Year-to-date occupancies are just over 83 per cent with average room rates (ARR) at close to Dh800 and stronger than in New York, London and Paris.”
All this ‘despite having by far the largest new supply increases in the last three to four years’, Wooller added.
There is still a strong window of opportunity for hotels in the 3-star and below category, particularly given that 84% of upcoming supply is either 4- or 5-star in Dubai
‘Serviced’ residences too help
Launch a hotel – and add a residential element to it. Bring everything under a single popular hospitality brand. One more thing – launch offplan for the residences.
This has been the formula developers in Dubai and increasingly so in other emirates are deploying. Whether it’s a Fairmont, One&Only or St. Regis, such associations help. Especially when there’s so much competition for the global investors’ interest and funds.
For developers, it’s also a chance to raise funds to help through the project construction. Offplan sales also drive optimum visibility in the market. Done well, the residential sales help reduce the payback period for developers than what they can expect in a standalone hotel project.
“It is encouraging to see the diversification of the market that is taking place, including the serviced and micro-apartment segments,” said Nils Heckscher, Managing Director, Head of Africa and Middle East, PKF hospitality group.
“Mixed-used developments and serviced living concepts are gaining popularity among the ‘digital nomad’ population thronging into the UAE. You also have branded residences, two brands of hotels in the same building, and hotels that have residential apartments growing in popularity.
“This growing digital nomad population wants a small kitchenette in their hotel rooms, for example. The ‘workcation’ trend is also growing in popularity.”
Dubai's hotel developers will be taking note of all trends, current and new ones in the making. If each of these trends can keep the rally in hotels' boom times, why not?
- With inputs from Dhanusha Gokulan, Chief Reporter