Dubai hotel performance dips in January as occupancy falls
Average daily rates down 4% year-on-year, while revenue per room tumbles in light of increase supply
Hotels in Dubai started 2015 with a slump in performance. Average daily rates (ADR) dropped 4 per cent in January to Dh1,039.4 from the same month in 2014 as hotel room supply increased in the city, research firm STR Global, said in a report yesterday.
The fall in ADR and 2.5 per cent decline in occupancy rates to 85.6 per cent year-on-year in January sent revenue per available room (RevPAR-an industry benchmark for performance) falling 6.4 per cent to Dh892.
There are more than 88,000 hotel and hotel apartment rooms in Dubai. By next year, the city is expected to see an additional 20,000 rooms as it prepares to accommodate 20 million visitors by 2020, according to the Dubai Corporation of Tourism and Commerce Marketing (DCTCM).
“Dubai posted declines in all three performance metrics. The drops were in large part because of the exceptionally strong January 2014 showing, which was the strongest January performance during the last 10 years,” Elizabeth Winkle, managing director of STR Global, said in a statement. She added that there are “downside risks” that the decline in ADR will continue throughout the year.
Similarly, Christopher Hewett, senior consultant at TRI Consulting in Dubai, said hotel occupancy in the emirate in January remained stable year-on-year at 86 per cent. But ADR dropped 4.6 per cent to $384 (Dh1,410), resulting in RevPAR to decrease by 4.6 per cent as well to $332.
He, however, expects occupancy and ADR to decline by 2-3 per cent this year over 2014, thereby causing RevPAR to drop by 5-6 per cent. This is due to higher hotel room supply, stability in neighbouring tourism destinations and currency fluctuations, he said.
“Based upon our review of the market, we anticipate RevPAR levels will fall between 5-6 per cent in 2015 compared to last year due to a number of factors including increased supply, lower expected demand from Russia and the CIS [Commonwealth of Independent States], weaker euro, strengthening US dollar and the revival of neighbouring markets including Egypt,” Hewett said.