By Andy Sambidge
Hospitality Management Holdings chief says rising construction costs also putting pressure on investment returns in emirate
The chief executive of a Dubai-based hotel group has warned that high land prices may slow down the emirate's plan to attract 20 million tourists annually by 2020.
Laurent A Voivenel, CEO of Hospitality Management Holdings (HMH), said rising construction costs and high land prices were putting pressure on investment returns in Dubai.
Speaking at the Hospitality Expansion Middle East Summit, he said: "Returns on investment in the current landscape are under pressure due to high land prices and rising construction costs. Land in prime locations is very expensive. This could potentially slow down the development of hotels."
Highlighting the need for more mid-market hotels in Dubai, Voivenel added: "If Dubai is to draw 20 million visitors annually by 2020 it will need to diversify its hospitality offering in order to widen its appeal to growing middle class worldwide.
"So there is an urgency to accelerate the development of mid-market hotels in order to reach the right mix of accommodation available in the market.
"Investors must broaden their horizon and consider budget hotels like ECOS Hotels as the hotel market gets stronger. It is a fast growing and highly competitive segment that will reap rich dividends."
He also addressed concerns about oversupply of rooms in the UAE, saying: "The market in absolute terms will continue to grow from both a supply and demand perspective. If all rooms in planning were to reach completion, in the short term, supply growth is likely to outpace demand growth.
"However, in general terms we are bullish about the market as a whole and its prospects beyond 2020. Dubai needs to position itself as a quality value-for-money destination offering both the ultimate in luxury as well as budget hotels and Dubai Expo 2020 is the ideal platform to do so.
"It is a great opportunity to showcase to the entire world the very best of what the emirate has to offer in terms of hospitality, tourism attractions, infrastructure and technology, therefore, all of us in the industry must deliver on our promises," he added.
Founded in 2003 in Dubai, HMH was the first hotel chain in the Middle East to offer an alcohol-free environment.
With a current portfolio of 20 operating hotels, HMH is opening six more hotels this year with budget brand Ecos in Dubai, Coral Muscat, Coral Beirut, Coral Riyadh and Two Ewa serviced apartments in Sudan.
Voivenel also expressed plans to double the company’s UAE portfolio from seven hotels to 14 by 2020.
Adding the tourism dirham isn't going to help either