Why tourists just love the UAE
The UAE hospitality sector’s performance during the year remained stable despite massive supply as domestic tourism continued to grow, according to industry analysts and executives.
Filippo Sona, head of hotels for Middle East and North Africa, Colliers International, said 2017 has been a year of consolidation for the industry as the market has absorbed a considerable amount of supply over the last couple of years. Overall, the performance has remained stable compared to 2016. This is a positive sign for the industry, considering the increase in key count. Key performance indicators such as hotel room rates and occupancy have remained stable compared to last year, Sona noted.
In 2017, hotels across the Middle East have faced challenges with continuing low oil prices, more supply, fiscal reforms and restricted government budgets. The UAE, however, has continued to generate hotel demand by attracting more tourists, according to consultancy STR.
The increase in leisure tourists has been the highlight of the year, with several anchors supporting this trend such as Dubai Parks & Resorts, IMG Worlds of Adventure, Citywalk and leisure and entertainment events at popular malls such as The Dubai Mall and Mall of the Emirates. This has also had a balancing effect on the reduced corporate demand due to low oil prices.
Another interesting feature has been the return of certain traditional source markets such as Russia, which witnessed a 95 per cent growth in arrivals to Dubai compared to 2016.
Approximately 6,000 rooms were added in the UAE in 2017, the vast majority of them in Dubai, which accounted for 75 per cent of the supply.
In terms of hotel development, island destinations such as Al Marjan Island and the Palm Jumeirah have seen a lot of activity and interest from investors and developers. From an operational perspective, the industry has a higher need for hotel asset management with a highly competitive market and additional challenges such as Airbnb and online travel agents that command discounted rates and commissions. Proper revenue management and yield management are critical in order to deliver a healthy bottom line to hotel owners, Sona noted.
New attractions
As hotel projects continue to come online, new tourist attractions have come up to help drive leisure demand. This year, the extension of Dubai Creek around Business Bay was completed, as well as the Louvre Abu Dhabi. Master plans for the Dubai Harbour project were unveiled, featuring the Dubai Lighthouse and a cruise ship terminal. Additionally, the Marsa Al Arab project was announced, which will add two new islands around Burj Al Arab.
Meanwhile, the introduction of new visa regulations has boosted tourism arrivals from China and Russia. Also, alternative destinations such as Ras Al Khaimah are starting to better establish them- selves, providing additional depth and variety to the UAE’s tourism offerings, say STR analysts.
According to Dubai Tourism, the emirate’s hospitality sector saw significant growth by the end of the third quarter of 2017, with the city’s total number of hotel and hotel apartment keys standing at 106,167 spread across 678 establishments, representing an aggregated six per cent increase in capacity over a 12-month period versus the end of September 2016.
STR data showed there are 749 hotels in the UAE while 223 hotel projects are in the pipeline, which would add 64,771 keys to UAE’s existing room supply of 145,121. Dubai is adding 169 properties to its existing 457, increasing keys by 49,612 to its existing supply of 94,439 rooms by the end of October.
What hoteliers say
2017 has both been a very exciting as well as a challenging year, say hoteliers.
“We are witnessing massive growth in in-bound travel from key feeder markets such as India, the UK, China and Russia as well as inter regional travel with a big chunk coming from Saudi Arabia. The Middle East carriers reported the strongest annual traffic growth of any region globally. Looking ahead, the region forecasts an additional 258 million passengers a year on routes to, from and within the Middle East by 2035. That will continue to support demand for hotels,” says Laurent A. Voivenel, senior vice-president, operations and development for the Middle East, Africa & India, Swiss-Belhotel International.
Despite supply still exceeding demand, the UAE has maintained its position as one of the world’s top tourism markets in 2017, both in terms of visitor numbers and hospitality performance metrics.
UAE hotels traditionally enjoy high demand from September to April which translates into stronger average daily rates. Pleasant weather, a series of international and regional events and a pick-up in corporate travel all contribute to the UAE’s appeal during the period.
“We are also seeing a shift in business. This is mainly due to diversification of feeder markets as well as more mid-market travellers. We are seeing a highly fragmented market with an explosion of brands, including a lot of independent hotels that run on online travel agencies. On the one hand, it gives more choice to guests with a range of accommodation — not just focusing on luxury but also mid-market accommodation and serviced apartments, but on the other hand, it puts pressure on the market. Smaller brands are unable to drive direct demand and therefore compromise heavily on rates, which in turn disrupts the market,” adds Voivenel.
Kamal Fakhoury, CEO, Cristal Group, said during the year the industry has seen a strong pick-up from existing and emerging markets such as India, China, GCC, the UK and Russia as well as the opening of new markets. “Globally speaking, the emirates is one of the most soughtafter travel destinations offering fabulous attractions, a rich cultural heritage, natural diversity and developed infrastructure,” Fakhoury added.