Dubai Hotel Market Summary
Dubai is strengthening its position as one of the largest hospitality markets globally. The supply currently stands at 82,000 hotel rooms, an increase of 5.3% YoY. The future pipeline is still strong, with 17,400 and 9,200 keys due to enter the market in 2018 and 2019 respectively.
Key projects include the hotels being developed by Meraas on Bluewaters Island, which will be surrounding the iconic ‘Ain Dubai’ also known as the Dubai Eye. The project is envisioned to become a new tourism hot spot in Dubai and aims to attract 3 million visitors per year. Due to open in 2018, Ain Dubai will be the largest Ferris wheel in the world and Dubai’s next must-visit attraction.
One of the major openings in Dubai over the last quarter of the year was the Bulgari Resort and Residences. Although small in size (just 120 keys) this project is expected to become one of the leaders in the luxury resort segment.
Dubai remains a strong tourism destination, progressively growing its regional strength and leaning towards a global role in the tourism market. Plans from DTCM to grow the number of visitors to 20 million in 2020 are ambitious as the number of visitors in 2016 was less than anticipated. Data for the first 9 months of 2017 show an improvement as visitors arrivals increased by 7.5%.
In terms of key source markets, there is a noticeable shift from traditional source markets to South Asia and China. Tourists from China and India increased 49% and 20% respectively YoY (data as of YT Sept 2017), while the number of tourists from neighbouring GCC countries (most notably Saudi, Oman and Kuwait) declined 10% YoY. Given the demand shift in purchasing power, hoteliers are adjusting their rates and packages to cater to these new source markets, thus the market continues to record declines in overall average ADRs and consequently in RevPAR. YT November data suggests that ADRs declined to USD 181 compared to USD 189 during the same period last year. Occupancies remain strong at 77%.
Abu Dhabi Hotel Market Summary
Hotel supply has been relatively stable in 2017 with 600 rooms entering the market throughout the year. The pipeline for future projects is mostly located outside Abu Dhabi Island with current under construction projects focused on Saadiyat Island. This should contribute towards enhancing the appeal for leisure travelers as both Saadiyat and Yas Island have potential to be strong leisure demand generators.
Approximately 2,100 rooms are expected to enter the market in 2018. Expected completions include Fairmont (812 keys) and Jumeirah Saadiyat (295 keys), and Edition Al Bateen (200 keys).
The Abu Dhabi hospitality market remains largely reliant on public sector demand from oil, gas and defence industries. As such, the lower oil price environment has led government entities to scale back budgets, which negatively impacted the hotel industry. YT November 2017, occupancies remained largely stable at 71%, while ADRs fell 6% to USD 118 when compared to the same period last year. As a result, RevPAR was 6% below levels recorded in 2016.
Over the medium to long term, the Capital is focused on diversifying its tourism base, attracting tourists outside the ‘corporate sphere’. By positioning itself as an upcoming ‘entertainment city’, recent completions such as ‘The Louvre’ support this drive. This diversification towards more leisure demand is expected to benefit performance levels as it will support ADRs and occupancy levels.
Sharjah Hotel Market Summary
The number of hotel guests in Sharjah has stagnated in recent years, with 1.8 million guests in 2016, largely the same level as in 2012 and 15% below the peak of 2.1 million recorded in 2014. The largest source markets in 2016 were the GCC states (37%) Asia (23%) and other Arab nations (15%), which together accounted for around 75% of guest nights. SCTDA’s tourism development strategy aspires to attract more than 10 million tourists to Sharjah Emirate by 2021.
A key component of this strategy is to increase the capacity of Sharjah Airport to 25 million passengers by 2027 (more than double the 11 million handled in 2016). Other initiatives include visa relaxations for Chinese, Russians and Indians with US residency and the opening of tourism offices in these three core source markets.
Restrictions on the sale of alcohol and the focus on Islamic history and culture will continue to ensure that the hospitality market in Sharjah remains largely focused upon local residents and visitors from regional Islamic nations. This is recognised by the SCTDA within its plans to focus on 5 key market segments (family, culture, cruise, MICE and eco-tourism).
There are approximately 8,000 hotel rooms operating in Sharjah City (with a further 3,900 serviced or hotel apartments). There is a much higher focus on the mid and budget sectors of the market compared to either Dubai or Abu Dhabi, with 57% of the hotel rooms in Sharjah City classified as 3 star or below by the SCTDA. The same is true in respect of serviced apartments, with 64% of rooms classified as ‘basic’.
The SCTDA estimate that 13 additional hotels will be operational in Sharjah City by the end of 2020, adding a further 3,000 rooms to the existing supply (with an increased focus on branded developments to international chains such as Starwood and Accor). Given there is no data on the proposed completion dates of this additional supply, we have spread the scheduled completions evenly over the next three years.
The future supply of hotel apartments is expected to exceed that of hotels with 33 projects announced for delivery by the end of 2021, adding almost 5,000 rooms (more than doubling the existing supply).
The average occupancy rate (across hotels and serviced apartments) increased by 2% in 2016 to 63% but this remains below the peak level of 67% recorded back in 2013. While occupancies in hotels increased marginally in 2016 (to 64%), serviced apartments recorded a marginal decline in occupancies (61%). The strongest occupancies (73%) were recorded in the 3 star sector, while 1 star properties recorded the lowest occupancies in 2016 (50%).
Room rates have remained under pressure in Sharjah over recent years, with falls of between 10% and 15% pa recorded, since the market peaked in 2014. Data from SCTDA shows a decline of around 11% in room rates per annum, for even the most popular sector of the market (3 star). Data from STR confirms that room rates have declined further in the Sharjah market in 2017.