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Mon 23 Mar 2015 03:10 PM

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Dubai's hotel sector is cooling, says Emirates NBD

Hotel occupancy rates and revenues have dropped in Dubai over the past year due to rising supply - report

Dubai's hotel sector is cooling, says Emirates NBD

Hotel occupancy rates and revenues have dropped in Dubai over the past year due to burgeoning supply, according to research published by Emirates NBD bank.

Visitors to the UAE may find hotels in Abu Dhabi more competitive than those in Dubai, it added.

The supply of hotel rooms in Dubai last month was up 6.8 percent compared to February 2014 and total supply in 2014 was up 7.8 percent year on year.

This is putting pressure on occupancy rates and revenue in the emirate, the research note published on Sunday said.

Average hotel occupancy in Dubai stood at a “healthy” 86.2 percent in February, up slightly from January’s 85.8 percent but more than two percentage points lower than the same month last year.

Revenue per available room (RevPAR) also dropped last month, by -7.7 percent year on year, representing the ninth consecutive month of contraction.

Emirates NBD Research analysed data from hotel information group STR Global, and predicted that government targets to double the supply of hotel rooms in Dubai between 2012 and 2020 mean the downwards trend is likely to continue. A further 11,500 hotel rooms in 38 new hotels were under construction in January 2015, the analysis showed – around 16 percent of the current supply. A further 11,000 rooms are in planning.

“As demand growth is only expected to catch up with supply closer to the end of the decade, hotels’ pricing power is likely to continue to be eroded in the short term,” Emirates NBD said.

By comparison, the hotel sector in Abu Dhabi is continuing to grow and does not face serious challenges. RevPAR grew by an “astonishing” 29.2 percent last month compared to February 2014, and occupancy rates rose by 1.22 percentage point over the year, to 80.6 percent.

However, the bank noted there are few hotels in Abu Dhabi (about one third less than the number in Dubai) and the UAE capital’s RevPAR is 33 percent lower than in Dubai.

“In both cases, the low base makes a higher growth rate easier to achieve,” the report said.

“However the lower price point in Abu Dhabi does suggest that visitors to the UAE may find hotels in Abu Dhabi more competitively priced and better value than accommodation in Dubai.”

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