Dubai: The UAE is expected to spend over $300 billion by 2030 on infrastructure development as the construction sector bounces back after the economic downturn in 2008, according to a report by HVS, a hospitality consultancy.
The UAE’s construction sector gained momentum in 2013, the Middle East Hotel Development Cost Trends report stated.
Last year, Dubai won the bid to host Expo 2020, a six-month global exhibition that is expected to attract 25 million visitors. Expo-related infrastructure development and operations will cost around Dh32.39bn.
Under Dubai’s 2020 vision announced last year, the number of visitors in the emirate is expected to double from 10 million in 2012 to 20 million by 2020. In order to accommodate 20 million visitors, the number of hotels in Dubai is expected to double.
More three- and four-star hotels are expected to open in the emirate.
The government introduced an incentive to boost the development of hotels in this segment last year. A 10 per cent municipality fee will be waived for five years for properties that expect to operate before June 2017.
Also, government land will be allocated for the construction of three- and four-star hotels.
“All the projects in Dubai will enable a healthy balance between demand and supply post 2020,” Hala Matar Choufany, Managing Director at HVS, told Gulf News. She added that the projects will allow the market to “remain solid and sustainable” after 2020.
The UAE, Saudi Arabia, Qatar, Bahrain and Oman have recorded double-digit growth in branded room supply between 2010 and 2013, as per HVS data. The UAE’s supply growth was the highest compared to the other regional markets, with around 14,300 rooms.
In terms of percentage growth, Qatar was the highest, with an 89 per cent growth in rooms supply.
The region’s hotel room pipeline for the next four years is expected to boost total inventory by 57 per cent, according to the report. Saudi Arabia is expected to see an increase of 26,900 rooms, posting the highest growth in the regional markets, while the UAE is set to have around 21,800 rooms, half of which will be in Dubai. Doha, meanwhile, is likely to have approximately 7,000 additional rooms.
Half of the new supply will be upper-upscale and upscale hotels, which are conventional five-star and four-star properties, respectively. The UAE is likely to have 6,229 upper-upscale rooms and 4,771 upscale rooms by 2018.
Strong economic and tourism growth outlooks and the availability of land have helped drive new hotel development in the region, according to the report.
In addition, banks are expected to increase their lending in order to support the expansion in hotel supply.
With the political situation in some of the regional countries, the Gulf Cooperation Council (GCC) has attracted more regional foreign direct investment in real estate, and that is expected to continue, as per the report.
Hotel development costs
Changes in regulatory requirements for hotels to qualify for different classifications can boost development costs if the regulations stipulate larger facilities and higher standards, HVS stated in the report.
Also, the construction activity in the UAE and the rest of the GCC is expected to boost building materials prices in the short term. In 2012, material costs in the UAE were down as a result of fewer projects being awarded in 2011.