Dubai: Average hotel room rates in Dubai continued to drop in January this year due to growing hotel room supply and pressure on hotel demand as a result of plummeting oil prices, according to a new report from research firm HotStats.

Average room rates (ARR) in the emirate fell 9.3 per cent year-on-year last January to $312.83, which is a bigger drop compared to the 6.7 per cent drop in 2015 and occupancy declined to 86.7 per cent from 87 per cent in January 2015. As a result, revenue per available room (RevPAR) fell by 9.7 per cent for the month to $271.10 (Dh994.94). While there was an oversupply in the luxury sector, there was significant growth in development in the mid-market segment as Dubai looks to increase its appeal to more price sensitive travellers. The opening of more than 1,000 hotel rooms in the mid-market sector in 2015 put downward pressure on ARR at upscale hotels.

The decline in room revenue was further compounded by drops last January in food and beverage revenue by 0.9 per cent and conference and banqueting revenue by 4.5 per cent. This contributed to a 7.3 per cent decline in total revenue per available room (TrevPAR) and 13.5 per cent year-on-year drop in profit per room.

Performance levels

Elsewhere in the region, hotels in Cairo saw a 9.4 per cent increase in RevPAR, driven by an 8.8 rise in profit per room last January “as performance levels continued to grow following a relatively stable period of operation in 2015”, HotStats said in the report.

Occupancy levels at hotels in Cairo stood at 61.3 per cent last January, a 4.8 percentage point growth on the same month in 2015. Gross operating profit per available room (GOPPAR) touched $50.29 in the 12 months to December 2015, a 113.9 per cent increase from $23.51 in the 12 months to July 2014.

Meanwhile at Kuwait City hotels, profit per room dropped 15.7 per cent year-on-year in January, led by a 5.9 per cent decrease in RevPAR to $118.66, as the demand for accommodation continues to suffer amid the slump in the oil price.

As a result of the additions to supply in the market and the terror attacks in mid-2015, GOPPAR at Kuwait City hotels stood at $115.51 in the 12 months to January 2016, a 21.7 per cent decline from the high of $147.53 in the 12 months to March 2014.