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UAE hotel development gaining strength
April 24 2012

The United Arab Emirates has 44,886 rooms in the total pipeline, according to STR Global data.

Highlights
  • The United Arab Emirates had an existing supply of 474 properties comprising 88,622 rooms as of March, according to STR Global.
  • Abu Dhabi is forecast to more than double its supply base by 2014, according to Jones Lang LaSalle Hotels.
  • The increasing supply has been a drag on hotel performance.

GLOBAL REPORT—Largely unaffected by political unrest elsewhere in the Middle East, hotel companies are strengthening their position in the United Arab Emirates.

The nation had an existing supply of 474 properties comprising 88,622 rooms as of March, according to data from STR Global, sister company of HotelNewsNow.com. The United Arab Emirates also has 44,886 rooms in the total pipeline, most in the Middle East/Africa region, according to STR Global.

Wyndham Hotel Group has a portfolio of eight properties in the United Arab Emirates, five in Dubai, and one each in Abu Dhabi, Ajman and Sharjah. The properties consist of six Ramada-branded hotels and two under the Howard Johnson flag. “It’s definitely a region we’re focusing on,” CFO Robert Loewen said.

 

Robert Loewen

The company has 20 projects in the pipeline for the United Arab Emirates, he added.

 

The Carlson Rezidor Hotel Group has nine hotels in operation in the United Arab Emirates, with a further three in development, Chief Development Officer Puneet Chhatwal said. The company’s plan during the next “few years” is to bump its portfolio of United Arab Emirates hotels to 20. “A Radisson in Ajman is our next focus,” he said. “(Ajman is) one of the emirates in which we are not present.”

 

Puneet Chhatwal

Chhatwal said guests still are interested in traveling to the MEA region and view the United Arab Emirates as a safe haven from the Arab Spring uprisings. “People have to go somewhere, and that’s driving demand in the emirates … a lot of leisure demand.”

 

Development outside Dubai
While Dubai is the subject of much of the talk of hotel development in the United Arab Emirates, hoteliers also are looking at the other six city-states that comprise the country, including Abu Dhabi, Ajman, Fujairah, Ras al-Khaimah, Sharjah and Umm al-Quwain.

 

The Ramada Downtown Dubai

Abu Dhabi is a particular focus outside Dubai, development executives said. The market will more than double its base of 13,000 rooms by 2014, according to Jalil Mekouar, managing director, Middle East and Africa for Jones Lang LaSalle Hotels. By comparison, Dubai will add another 11,000 rooms to its inventory by 2014, Mekouar said.

 

There were 311 hotels comprising 58,743 properties in Dubai as of March, according to STR Global. In Abu Dhabi, there were 82 properties in the market at the end of March, comprising 17,672 rooms. Abu Dhabi’s 10,730 rooms in the total active pipeline are second in the Middle East/Africa region to Dubai’s 26,907 rooms, according to STR Global.

Starwood Hotels & Resorts Worldwide opened its St. Regis Saadiyat Island Resort in Abu Dhabi earlier this year, the first St. Regis-branded property in the Middle East. The St. Regis Abu Dhabi is scheduled to open later this year, Guido de Wilde, Starwood’s senior VP and regional director for the Middle East, said in an email.

The company has 23 operating hotels in the United Arab Emirates and nine more scheduled to open by 2015. Starwood’s first openings in Sharjah—one flagged under Sheraton and another under the Four Points brand—will occur in 2013. Further, a Luxury Collection property will open in Ajman in 2013.

All told, Starwood plans to have a presence in five emirates.

“The majority of our development in the (United Arab Emirates) and across the Middle East remains in the luxury and upper-upscale segment with our St. Regis and W Hotels brands,” de Wilde said. “Luxury brands are enjoying (the) strongest (revenue-per-available-room) gains of any segment.”

Emirates performance
The Middle East/Africa region recorded positive results for March, according to STR Global data. The region’s occupancy grew by 14.6% to 65.1%; average daily rate was up 3.3% to $175.33; and revenue per available room increased by 18.4% to $114.07.
Still, hoteliers contacted for this report noted softening in the emirates. Specifically, the growing hotel supply in Abu Dhabi could be impactful, Mekouar said. “This is not going to help hotel performance at all,” he said.

Abu Dhabi saw decreases in the three key performance metrics, according to STR Global. Occupancy fell by 6.9% to 66.2%; ADR dropped 4.9% to 605.42 United Arab Emirates dirhams ($164.82); and RevPAR decreased by 11.5% to 400.52 United Arab Emirates dirhams ($109.04).

Mekouar added, “The supply is, we believe, much stronger than (the market) can absorb,” he said. “Hotel development is coming faster than the infrastructure allows.”

Wyndham’s Loewen attests to the slowdown. Abu Dhabi’s RevPAR performance is down 7 points year over year, he said.

 

Jalil Mekouar

As Dubai goes, so goes the United Arab Emirates, Mekouar said. “They’re too small to be key drivers,” he said.

 

Dubai saw occupancy grow by 9.5% to 86.8% in March; ADR increased by 10.2% to 982.66 United Arab Emirates dirhams ($267.53); and RevPAR jumped 20.6% to 853.13 United Arab Emirates dirhams ($232.26).

There are, however, several other factors that bolster the region’s demand outlook, Carlson Rezidor’s Chhatwal said. They are:

  • airlift;
  • infrastructure;
  • a “very friendly economic platform that drives business tourism”;
  • and proximity to Asia and its large travel base.

There is hope performance will rev up again soon, as is evidenced by the multitude of openings planned in the near future for the United Arab Emirates.

“Our decision to launch St. Regis in Abu Dhabi and our multiple U.A.E. openings over the next two years demonstrates our confidence in this market as a whole,” Starwood’s de Wilde said.

HotelNewsNow.com’s Stephanie Wharton contributed to this report.

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