The performance of Dubai’s hotel market could return to “much healthier” levels towards the end of this year a suffering a “major shock” caused by the coronavirus pandemic, a senior Deloitte Middle East executive has said.
Deloitte’s annual Middle East Real Estate Predictions 2021 report also said the slump in international visitors to Dubai due to the impact of Covid-19 restrictions has hit footfall and spending at the city’s sprawling shopping malls.
Robin Williamson, head of real estate, Deloitte Middle East, said: “The Dubai hotel market has experienced a major shock and has had to adapt during a very difficult period. With the vaccine currently being rolled out, Expo rescheduled to start on October 1 and Dubai’s 50th year since nationalisation, it is hoped that a rebound will occur and performance matrices return to much healthier levels towards the end of this year.”
His comments come as hotels in the UAE suffered their worst year on record as coronavirus wreaked havoc with the country’s tourism industry.
Industry analysts STR said average occupancy levels in the UAE throughout last year stood at 51.7 percent, down by nearly 30 percent on 2019, while average daily rates (ADR) in hotels fell by more than 16 percent and RevPAR slumped by 41 percent.
Dubai Tourism also recently suspended live entertainment in hotels and restaurants until further notice after hundreds of coronavirus violations of guidelines at venues, resulting in the closing down of 20 establishments.
STR said average occupancy levels in the UAE throughout last year stood at 51.7 percent
The hospitality industry was sent a circular by Dubai Government’s Department of Tourism and Commerce Marketing (DCTM), ordering venues to suspend bands, DJs, dancers and live entertainers performing in hotels and restaurants.
Deloitte’s report said Covid-19 has caused significant disruption across all real estate sectors in 2020 with owners and occupiers having to make necessary adjustments to business operations in response to the statutory restrictions on capacity and mobility.
A Deloitte survey conducted in September suggests that the market recovery to 2019 levels may not be until 2023, or possibly later. Meanwhile many hospitality companies are revising their business strategies and building resilience towards the new normal.
Oliver Morgan, director and head of development in Deloitte’s Real Estate team in the Middle East said: “In the short-term, cash management and financing/lender considerations are some of the main priorities across all real estate sectors. Macro-economic and demographic factors as well as related government initiatives are likely to define the shape and pace of recovery for the real estate sectors in 2021.”
Robin Williamson, head of real estate, Deloitte Middle East
Key findings from the Deloitte report also included that demand for secondary market residential properties has outpaced transaction volumes for off-plan units, while cash transactions still dominate.
Meanwhile, developers are offering discounts, fee waivers and rent-to-own incentives in an attempt to attract buyers. Tenants remain in the driving seat as rent declines for residential properties continue into 2021, said Deloitte.
It added that office space usage has faced disruption as remote working models were necessitated by the Covid-19 pandemic. Changes in spatial needs are likely to be promoted when leases expire or when companies may choose to downsize or even expand their facilities.
The report said the office of the future will blend the virtual and physical environments to enhance employee, contractor and key stakeholder engagement through collaboration tools and dynamic work locations.
Multi-channel retail formats that incorporate online shopping preferences, alongside F&B concepts and experiential retail in bricks and mortar offerings are also expected to drive consumer preferences in the medium term.
Deloitte said the reduction in international visitors due to Covid-19 travel restrictions has impacted footfall and spending at bricks and mortar stores while mobility restrictions have forced residents to make more online purchases, including setting up online accounts across multiple platforms.
“This trend is expected to continue even when restrictions on movement ease,” it added.
Deloitte’s report also said a growth in the e-commerce segment has increased the requirement for storage and fulfilment centres, boosting the demand for warehouses. Further expansion in the e-commerce and cargo sectors is expected in the short to medium term, with more design and build for specific end users, as opposed to speculative build.
Additionally, next-day or same-delivery options are expected to create a requirement for last-mile delivery hubs, close to the residential and business districts.
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