By Shane McGinley
Property owners turn to classifieds to lure new investors as competition sees hotel sales stall
Dubai hotel owners are increasingly turning to listings
websites to source potential buyers for their properties as they struggle to offload
assets in the city’s glutted hospitality market.
At least five budget and midmarket hotels are for sale on
the city’s classified websites, with prices ranging from $19m for a three-star Deira
hotel to $35m for a Tecom-based property.
Industry analysts said owners are broadening their advertising
in an attempt to attract investors as the city’s increasing number of hotels puts
downward pressure on profit margins
“It is typically very hush, hush. There are only a small
number of investors able and willing to invest in hotels,” said Matthew
Armstrong, property advertising manager at local portal Dubizzle. The site has
seen a rise in properties being sold to “end users and international institutional
investors alike,” he said.
Older hotels in Dubai’s traditional districts of Bur Dubai
and Deira could be struggling to attract guest traffic as newer,
centrally-placed properties win the fight for tourists, said Charles Neil, CEO
of real estate consultancy Landmark Properties.
“The hotels are old, costs may be mounting, and due to the
amount of new availability, revenues could be dropping, therefore it could be a
simple case of ‘get out now’,” he said.
“The embargo on Iran may also be taking its toll on business
travellers from Iran who would typically use hotels in Deira and Bur Dubai. In
Barsha there are also huge numbers of hotel apartments that offer very cheap
rates, so that may be putting a strain on hotel operators.”
Dubai’s total hotel supply stood at approximately 53,600
rooms in December, according to property broker Jones Lang LaSalle, to include 2,500
branded rooms that came online in 2011.
The city is expected to absorb a further 5,800 guest rooms in
the first quarter of 2011, JLL said, further squeezing average room rates. Growth
was flat in the last quarter of 2011.
Projects due for completion this year include Al Khor
Rayhaan (Al Ghurair City), Doubletree By Hilton Al Barsha, Fairmont The Palm,
Jumeirah Creekside Hotel and Movenpick Jumeirah Lake Towers.
According to consultancy STR Global, Dubai has more than
13,300 hotel rooms in its construction pipeline going forward, compared to
5,298 rooms in neighbouring Abu Dhabi
The city could see a further wave of hotels being offered
for sale as owners choose to exit the market rather than compete with newer,
branded properties said David Le Bail from real estate consultancy DTZ.
“It is a development cycle and an investment strategy. After
a few years, once the asset has reached its optimum profit-making levels, you
sell it to optimize your return and then you develop another asset with the
cash generated,” he said.