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Wed 16 Sep 2015 01:55 PM

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Dubai set to address hotel market imbalance with midscale rush

Nearly 70% of 3,600 new hotel rooms to enter Dubai market by year-end will be four-star or less, says JLL

Dubai set to address hotel market imbalance with midscale rush
Dubai has traditionally been dominated by luxury hotels like the Burj Al Arab. (AFP/Getty Images)

The midscale sector of Dubai's hotel market, which has been dominated by luxury properties for years, will get a major boost in the final months of 2015 as the emirate attempts to address the balance.

Data released by JLL revealed that up to 50 percent of the 3,600 new hotel rooms to enter the Dubai market in the final months of the year have a 3-star or lower rating, while competitive room rates are set to rival the luxury market, as 69 percent will have four stars or less.

“This will add much-needed midscale room stock to the emirate’s hotel landscape, where three-star or below room supply only accounted for 29 percent of total availability in the first quarter of 2015,” said Nadege Noblet-Segers, exhibition manager, Arabian Travel Market.

Mid-market travel has been selected as the official show theme for ATM 2016, which will take place at the Dubai International Convention & Exhibition Centre from April 25-28 next year.

Destinations like Dubai are already putting in place programmes to encourage investment into midmarket hotels such as the release of government land plots for three and four-star hotel projects, speeding up of the construction permit approval process to just two months, and the waiver of the 10 percent municipality room tax for four years upon completion.

Dubai currently has a total hotel key count of approximately 94,000. This figure is set to rise to between 140,000 and 160,000 keys by 2020 with around 20 percent set to target the mid-market hotel sector.

A host of global hotel brands and local UAE-based operators are targeting the aggressive brand expansion in this area.

A Knight Frank study revealed that the Dubai segment showed a year-on-year RevPAR increase of 0.5 percent during the first quarter of the year, which was driven by an increase in average rate at a time declining performance for the luxury and upper upscale segments.

Demand is being driven by a growing middle class in markets such as China, India and Africa combined with budget Generation Y travelers and young families.

“There is massive pent-up demand for new midscale projects and this could also be the catalyst for a new wave of visitors for whom saving money on their hotel stay would free up their budget to spend in other areas from dining and attractions to shopping and excursions,” said Mohamed Awadalla, CEO, TIME Hotels, which has an active portfolio of properties covering both the upscale and midmarket segment.

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