As Dubai sets new tourism records, welcoming over 9.3 million international visitors in the first-half of 2024 – a remarkable 9 per cent increase from a year ago – the city solidifies its position as a leading global travel destination.
The surge underscores Dubai’s booming luxury vacation sector. Analysis of the performance of listed hotel groups over the past year shows a clear trend: acquisitions, new institutional investors, increased interest from sovereign funds, a diversified clientele, and global wealth growth, have elevated investor interest in luxury hotels.
This has led luxury assets to represent about 20 per cent of the global hotel liquidity.
Long-term performance remains positive
Despite a recent dip after its results. Marriott, based in the US, recorded the best one-year stock performance, with a 14.15 per cent growth reaching a market cap of $58.2 billion. Following Marriott are Hilton Worldwide, owned by Blackstone Group, and Hyatt Hotels Corp. Hilton saw a 11.2 per cent increase in stock performance and a market cap of $38.7 billion, while Hyatt reported a market cap of $13.4 billion and stock growth of 9.28 per cent.
Following the three US groups, the annual performance ranking continues with French group Accor (7.56 per cent) and Chinese group Huazhu Hotels Group (6.8 per cent), followed by InterContinental Hotels (5.67 per cent). At the bottom are the US investment trust operated Host Hotels & Resorts (5.23 per cent), and Wyndham Hotels & Resorts (4.87 per cent) and Choice Hotels (4.21 per cent), with Spanish chain Meliá Hotels closing the list with a 3.98 per cent increase and a market cap of $5.4 billion.
Common growth factors
With the pandemic's immediate impact fading and global travel rebounding, Dubai's luxury hotels have demonstrated remarkable resilience. This is highlighted by Dubai Airport’s re-emergence as one of the busiest airports worldwide. Several factors underpin this growth: increased demand and supply, a more diversified customer base, and global wealth growth.
Dubai’s strong appeal to both international and business travellers continues to thrive, driven by the recovery of global tourism. Emerging markets such as India are also gaining traction, with Marriott, Hyatt, Hilton, Accor, and Wyndham making significant investments. Eco-tourism destinations in South America are becoming popular. Leveraging technology, both for predictive analytics and automating routine tasks, is essential for enhancing human interaction and guest engagement.
Group strategies driving growth
Recent data shows that Dubai is on track to open 31 new hotels in 2024, bringing the total number in the emirate to 851. The number of hospitality establishments reached 820 by the end of 2023 to meet growing demand, with 73 per cent of the new supply falling within the luxury and upper upscale segments.
Private groups are significantly active with acquisitions and new openings driving growth. Marriott is expanding globally benefiting from post-Covid travel recovery and increased RevPAR (revenue per available room). Hilton Worldwide has increased revenues with high occupancy rates and higher average daily rates, while InterContinental Hotels Group has focused on new openings in high-demand locations, boosting leisure and business travel bookings.
Accor has announced 350 new hotels in Europe and North Africa, focusing on emerging markets. Hyatt Hotels Corporation is concentrating on luxury and lifestyle brands, having sold assets worth $2 billion to streamline management and franchising, and announcing new openings and acquisitions in Germany and Switzerland.
Wyndham Hotels & Resorts and Choice Hotels International are focusing on franchising, excelling in mid- and economy segments, and Choice Hotels concentrating on midscale and upscale growth.
Huazhu Hotels is expanding into mid-tier and upscale hotels, Host Hotels & Resorts has grown due to high occupancy in urban destinations and resorts, and Meliá has done well in leisure destinations, particularly in Spain and Latin America.
Way forward
Despite strong growth, luxury hotels may encounter challenges over the next five years, including geopolitical and economic instability, escalating construction costs, and the need to preserve brand integrity amid rapid expansion.
Effective capital management and investment in technology are crucial. To address these challenges, strategies should include forging strategic partnerships, enhancing customer experiences through personalised and authentic services, and achieving a balanced integration of human interaction with tech advances.
