Hotels in the UAE recorded declines in key performance indicators for 2017, although occupancy rates edged up, according to analysts STR.
It said in a new research note that occupancy across the UAE rose by 0.5 percent last year to 75.1 percent compared to the previous year.
However, average daily rates (ADR) and revenue per available room (RevPAR) fell by 3.8 percent and 3.3 percent respectively.
STR said the declines were partly due to continuing supply growth which affects hotel performance in the country, especially as Dubai is building up to welcome about 25 million visitors for the Expo 2020 event.
Analysts said: "Not only will the amount of new hotel supply continue to influence Dubai’s ADR, the type of new hotel supply entering the market will create a shift in the pricing landscape, with more offerings in the Midscale segment.
"The market has been historically dominated by the upper-tier hotel classes. Additional offerings in the middle-pricing tiers, however, has helped the market’s demand continue to rise, as a wider price range has made Dubai more accessible at various travel budgets."
STR noted that Dubai continues to add new tourism attractions to stimulate demand growth, helping the market drive hotel demand as inventory expands.
Analysts added that Abu Dhabi is following a similar trend, but at a smaller scale due to a smaller market size. Along with hotel supply developments, the market is adding several new cultural attractions, including the Louvre Abu Dhabi, which opened in November, and additional museums slated to open in the coming years.
"An expected increase in oil prices, combined with sustained growth in the non-oil sector, should drive economic expansion in Abu Dhabi in 2018, allowing the economy to rebound from relatively flat performance during the previous 12 months. That should be an encouraging signal that the hospitality industry will turn the corner," STR said.
The research note also said that hotels in Kuwait experience mixed fortunes during 2017, with occupancy jumping by nearly 9 percent to 56.7 percent but ADR falling by 4.7 percent. RevPAR rose 3.7 percent.
"Demand, up 12 percent in 2017, has continued to grow following the economic downturn caused by lower oil prices. However, room rates have now decreased for three consecutive years," it added.
In the wider Middle East region, hotels reported negative 2017 performance results with occupancy down by 1.1 percent to 65 percent, ADR down 4.5 percent and RevPAR falling by 5.6 percent.
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