Hotel rates slump in Dubai, Abu Dhabi in 2016 despite demand spike

New STR data shows that demand in the UAE's hospitality sector grew faster than supply last year for first time since 2013
Hotel rates slump in Dubai, Abu Dhabi in 2016 despite demand spike
(KARIM SAHIB/AFP/Getty Images)
By Staff writer
Wed 25 Jan 2017 01:42 PM

Demand in the UAE's hotel sector rose at a quicker rate than supply last year for the first time since 2013 but daily rates still dropped significantly in both Dubai and Abu Dhabi, according to new figures.

Analysts STR said hotel supply rose by 4.8 percent during 2016 but demand grew at 5 percent.

Abu Dhabi closed the year with declines in both occupancy (down 3.6 percent to 71.7 percent) and average daily rates (ADR), which slumped by 9.9 percent to AED467.49.

Dubai reported a slight increase in occupancy (up 0.5 percent to 77.3 percent) but a significant drop in ADR (down 9.9 percent to AED711.41).

STR said the performance of Saudi hotels was "heavily affected" by oil prices, with a correlation between the drop in oil prices and the downturn in hotel performance and profitability for Gulf Cooperation Council countries.

It said Riyadh was heavily affected in 2016 with occupancy down 10.2 percent and ADR down 8.1 percent.

According to STR analysts, oil is not the only factor affecting the country’s hotels, however, as sharp supply growth has pressured occupancy levels and overall performance.

In December, Saudi Arabia’s luxury hotel segment experienced an 18.6 percent increase in supply compared with the same month the previous year, contributing to a 23.3 percent year-over-year decline in revenue per available room (RevPAR) for the country’s luxury hotels during the month.

Regionally, STR reported that hotels in the Middle East saw occupancy fall by 2.2 percent to 66.2 percent during 2016 while ADR dropped by 7.2 percent and RevPAR decreased by 9.2 percent.

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