Dubai: A string of business and leisure events in the UAE next year will keep hotels booked and occupancy rates high, but revenues will suffer due to oversupply, according to industry analysts.
Common industry measures such as revenue per available room (RevPAR), average daily rate (ADR) and average length of stay have suffered, resulting in lower margins for hotel operators.
"Dubai has seen a resurgence, occupancy levels generally have improved from the back end of 2008 and 2009, but it has come at the expense of average daily rates. That's a problem that you have with people competing on rates," Peter Goddard, managing director of TRI hospitality consulting, said to Gulf News.
Downward pressure
With tens of thousands of new rooms being added to the already competitive market, additional and consistent downward pressure will be exerted on industry revenues.
During the first six months of this year, the average length of stay in Abu Dhabi hotels fell slightly from 2.75 nights to 2.63 nights, reducing occupancy levels by 8 per cent. Meanwhile, guest nights rose 16 per cent.
Tourist numbers, however, are expected to stay the course of growth as cultural, sporting and business events continue to attract visitors, resulting in higher guest nights.
Starting off the year high will be the Dubai Shopping Festival when tourists and residents alike hunt for bargains in malls.
The year is expected to rise above the 2009 lull caused by the global economic crisis that heavily hit the tourism industry. Near the end of the year, racing fans from across the region and further fill up UAE hotels to catch the Abu Dhabi Formula 1 Grand Prix.
"The UAE has a full calendar of events that are well established, especially Dubai with three festivals.The different tourist seasons among emirates [also] result in a higher number of tourists," said Guy Wilkinson, partner and general manager at Viability Management Consultants.
Dubai Department of Tourism and Commerce Marketing data showed that in the first half of this year compared to the same period of 2009, Dubai saw an 18 per cent increase in guest nights, a 7 per cent increase in supply of rooms but only a 6 per cent rise in combined revenues for hotels.
Softening rates
Despite efforts to keep Dubai in a high season all year round, the slower months of summer will see a continuation next year of "softening rates," Wilkinson said.
"Recently, rates have been low in summer. There is an oversupply which is particularly visible in areas like Al Barsha. Next summer will be a repetition of that. There is no reason why demand will increase extraordinarily next year," he said.
Goddard added that in 2011, Dubai is "going to see a continuation of the current trend, which is pretty flat occupancy levels and with new hotels coming on, deteriorating rates."
Dubai's flagship hotel operator Jumeirah Group alone will add 400 rooms with its new hotel in Abu Dhabi next year.
On a wider forecast covering the Gulf countries, analysts said the market has more opportunities and the outlook is positive.
"The Saudi market in particular is looking strong. It was better insulated from the economic downturn and it has this incredible economic critical mass and also population moving the country in the right direction," Goddard said.
2011 events: What to expect
Dubai
- Dubai Shopping Festival
- Dubai Summer Surprises
- Eid in Dubai
- Dubai Film Festival
- Gitex
- Dubai Air Show
- Cityscape
- Middle East Business Aviation
Abu Dhabi
- Abu Dhabi International Triathlon
- Al Ain Aerobatic Show
- AD Adventure Challenge
- Ferrari World Abu Dhabi- the world's biggest indoor theme park
- WOMAD- World of Music and Dance
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