Hotel room rates fall 8% as supply surges

Decline supported by strong supply growth in hotel market, says STR report

Average room rates at hotels across the UAE fell 8 per cent last month compared to the same month in 2016 to Dh712 on the back of strong supply growth in the market.

According to the latest report by STR, a data provider, average occupancy levels across the country rose marginally, by 0.5 per cent, to 81 per cent, as revenues per available room declined by 7.5 per cent to Dh577.

Most of the occupancy growth in January occurred in smaller markets like Fujairah (where occupancy was up 7.2 per cent), Ras Al Khaimah (up 10 per cent), and Sharjah (up 5.5 per cent). The UAE’s main markets, Abu Dhabi and Dubai posted a 1.5 per cent decline and nearly flat performance respectively in January.

“As a result of strong supply growth, especially in the midscale segment, [average daily rates] declined across most Emirates markets in January,” the STR report stated.

Elsewhere in the Middle East, occupancy rates in Egypt’s hotels rose 24 per cent to 47.5 per cent, while average room rates jumped 93 per cent to 1,276 Egyptian pounds (Dh294). STR analysts noted, however, that the devaluation of the Egyptian pound has “significantly inflated” figures for room rates. When reported in US dollars, room rates decreased 19 per cent.

Occupancy up

“January did result in an improvement in occupancy from the very low levels of the last 15 months. STR analysts believe that year-over-year results show some recovery from the air crash in the Sinai Peninsula in late 2015, but ongoing security concerns are still weighing on actual performance levels,” the report said.

Demand for hotels in the country increased around 25 per cent in January, which is a jump when compared to a drop in demand by 15 per cent for the full year 2016.