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Dubai hotel rates, occupancy drop

Decline due to high supply growth

Gulf News


High supply growth has weighed on the hotel industry in Dubai, with the average daily rates (ADR) and occupancy levels posting declines in September.

The latest preliminary data released by STR on Wednesday showed that ADR fell by 10.6 per cent year-over-year to Dh497.67, while occupancy dropped by 4.7 per cent to 76.6 per cent.

The revenue per available room (RevPAR) also posted a 14.8 per cent decline to Dh381.20. The hotel industry saw a supply growth of 5.6 per cent during the period, but demand could not keep up, increasing only by a marginal 0.6 per cent.

Analysts said the slowdown is also due to shorter holidays and decline in event bookings in September compared to a year earlier.

“For example last year, Dubai hosted the biennial international Congress of the International Society of Blood Transfusion,” STR said.

“Additionally, residents experienced a shorter vacation period this year, as the Eid Al Adha holiday shifted from 11-18 September in 2016 to 31 August to 3 September in 2017.”

Nemo Acimovic, general manager at Millennium Plaza Dubai, agreed that demand is indeed failing to keep up with high supply. “The supply continues to outweigh demand, thus promoting a rate price competitiveness,” Acimovic told Gulf News.

However, as the industry expects to host a huge number of visitors in the coming years, especially during Expo 2020, there will be enough demand to meet the huge supply.

“We know that in our industry, there is a very clear goal of achieving 20 million visitors by 2020, therefore, we know and expect the new supply is required to support this increase,” said Glenn Nobbs, general manager at Copthorne Hotel in Dubai.

He also argued that occupancy rate is not on a decline, citing that “there is a good level of business in town.”

“For October, I have heard that some hotels have extended their summer rates instead of implementing a rate increase with the change in season, which I believe to be more out of fear than the case of oversupply.”