Rising competition, strong US dollar to hit Dubai hotel rates in 2016

New CBRE report says Dubai's hospitality and retail sectors remain resilient despite challenging economic conditions
Rising competition, strong US dollar to hit Dubai hotel rates in 2016
(AFP/Getty Images)
By Staff writer
Wed 23 Dec 2015 01:55 PM

Dubai’s hospitality sector has proven to be very resilient in the face of more challenging economic conditions, locally and globally, but hotel rates will be impacted next year by rising competition and a strong US dollar, according to a new report by CBRE. 

It said in its Dubai Annual Market Update Report that during the first nine months of 2015, the emirate welcomed 10.5 million guests, compared to 9.6 million during the same period in 2014, registering around 9 percent growth.

It added that despite the increase in visitors, year-to-date occupancy rates for the first 10 months of 2015 were down around 1 percent at 77 percent.

Mat Green, head of research & consultancy UAE, CBRE Middle East, said: “ADR and RevPAR performance have suffered more markedly, falling 7.6 percent and 9.5 percent respectively. This was largely attributed to increased competition amidst rising room supply, with over 6,000 new hotel and hotel apartment keys delivered during 2015.”  

CBRE said increasing competition and a strong US dollar are likely to maintain deflationary pressures on ADRs in the short-to-medium term.

However, it added that it expects occupancy rates to fare better amid strong visitor growth. Approximately 22,000 rooms are expected to be delivered between 2016 and 2018 to cater to this expected growth. 

CBRE added in the report that supply in Dubai’s retail sector expanded by around 8 percent during 2015, with the opening of a number of notable retail facilities, including City Centre Me’aisem, Box Park, Dragon Mart 2 and the Golden Mile, as well as MAF’s expansion of Mall of the Emirates. 

“Despite the rise in supply, occupancy rates within the major centres (Dubai Mall, Mall of Emirates, Ibn Battuta Mall and Mirdif City Centre) remain exceptionally high, running at close to 100 per cent. Dubai continues to attract an ever increasing number of international brands, with the likes of Apple, All Saints, and Lulu Lemon all opening their first regional stores this year,” said Green. 

He added that with the demand outstripping supply across the retail market, vacancy rates across major malls in the Emirate is less than 2 percent. An additional supply of 556,000 sq m is in the pipeline between 2016 and 2018.

With Dubai continuing to attract a rising number of tourists, the retail sector is expected to maintain current performance, CBRE said, adding that there are some potential headwinds to consider, specifically the US dollar strength which could have an impact on retail sales.

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