Dubai: The performance of the UAE’s hotel sector is likely to weaken year-on-year in 2016 as new hotel room supply and macroeconomic factors put pressure on room rates and occupancy, according to industry experts.

The hotel sector in Dubai has seen declining rates and occupancy this year because of factors including growing supply, the weakening of the rouble and euro against the strong US dollar to which the UAE dirham is pegged, and lower oil prices, which have made a holiday in the UAE more expensive for some travellers from Russia and Europe.

Rashid Aboobacker, associate director at TRI Consulting in Dubai, said that hotels in the capital saw growth in performance indicators, such as occupancy and room rates, this year compared to 2014.

However, Yousef Wahbah, real estate transactions leader for the Middle East and North Africa region at global consultancy EY, said that the Abu Dhabi hotel sector’s performance has been lower this year.

Revenue per available room (RevPAR — an industry measure of occupancy and rates) across four-and five-star hotels in Dubai and Abu Dhabi are expected to drop around 5 per cent next year over 2015, he said.

Pressure on sector

“As Expo 2020 nears, Dubai will continue to see an increase in the number of hotel rooms being constructed across all segments. This is likely to put increased pressure on the hospitality sector, which may lead to a slight decline in performance over the next year,” he said.

“In Abu Dhabi, hotel supply is also expected to increase across the four and five star segments over the coming year, which may lead to a modest decline in the sector’s performance,” he said.

Aboobacker expects both hotel markets to be subdued in 2016.

“In Abu Dhabi, we expect hotel performance to remain at levels similar to or marginally below this year,” he said.

Omer Kaddouri, chief executive of UAE-based Rotana Hotels, said that “the survival of the [hospitality] industries will be tough all over the emirates for the next two years considering the current scenario.”

RevPAR across four-and five-star hotels in Dubai touched Dh754 year to November, down 6.2 per cent compared to the same time last year. It reached Dh494 in Abu Dhabi, a 4.4 per cent decline over last year, according to Wahbah.

Despite the lower performance of the hotel sectors in both emirates this year, profitability of the hotels there is still strong, he said.

“Occupancy figures are still high, ranging between 75 per cent and 80 per cent across the year, comparable to leading international markets around the world such as New York, London or Paris,” he said.

New source markets

Rotana’s Kaddouri said that the company has had “a tough year in the UAE”, but it has seen a lot of demand from new source markets such as Poland, Slovakia and Hungary.

Rudi Jagersbacher, president of US hotel chain Hilton Worldwide for the Middle East and Africa, said that although the hotel industry in the region has faced challenges this year, he is “optimistic about the year ahead”.

“Important leisure segments such as family tourism now accounts for 12.5 per cent of global tourism — this indicator bodes well for UAE arrivals given the country’s tremendous family offering,” he said.


With inputs from Sarah Diaa, Staff Reporter



Factbox: Revenue per available room drops 6.5 per cent

Hotels in the Middle East reported lower occupancy, rooms rates and revenues year-on-year in November, according to a report by research firm STR Global.

Occupancy and average daily rate (ADR) were both down 3.3 per cent last month, to 69.2 per cent and $204.97, respectively. This led to a 6.5 per cent decrease in revenue per available room (RevPAR — an industry measure of occupancy and rates) to $141.90.

In Abu Dhabi, occupancy edged down 0.8 per cent to 84 per cent in November, while ADR declined 6.5 per cent to Dh737.7, resulting in a 7.3 per cent drop in RevPAR to Dh619.38.


Staff Report