Hotel rates in Dubai drop for second month in a row

Hotel room prices in Dubai weakened for the second consecutive month as the landscape became more crowded.

During February, considered a busy season, the emirate’s average room rates fell 5.6 per cent year-on-year to Dh983.48 per night, according to the research consultancy STR Global.

Occupancy rates dipped 1.9 per cent to 86.6 per cent. That pulled down a key measure of the hotel profitability – revenue per available room – by 7.4 per cent to Dh852.

In January, revpar fell 6.4 per cent year-on-year to Dh916.77.

The dips were attributed to an increase in room supply that outstripped demand.

The “average daily rate will be soft in response to the growin

g supply” for the rest of the year, according to Elizabeth Winkle, the managing director of STR Global.

Last month, New York-listed Hyatt Hotels opened the 464-room Hyatt Regency Dubai Creek Heights. A sixth Hyatt in Dubai’s Baniyas Square is expected later this year.

The French operator Accor plans to open its Aparthotel Adagio in Al Barsha this month and ibis Styles hotel by Dragon Mart by August. It already operates 16 hotels in the emirate and expects to have 3,000 rooms in the UAE before 2020 – about 2,000 of them in Dubai alone.

Many of Dubai’s high room rates are attributed to the concentration in the luxury segment.

“You can definitely see an element of that in the market, as figures from Dubai [Department of Tourism and Commerce Marketing] show,” said Rick Zeolla, the consulting general manager at the five-star Habtoor Grand Beach Resort and Spa in Dubai Marina.

“Dubai needs to be attractive in the marketplace.” In January, for instance, when the average daily four- and five-star room rate in the emirate was US$384, according to TRI Consulting in Dubai, the Red Sea resort town of Sharm El Sheikh in Egypt offered similar rooms at $42.74.

“In Dubai the recent decline of Russian tourists could have been less impacted if Dubai could offer extensive mid-market accommodation, as the price of the whole holiday package would be as competitive as the Red Sea coast of Egypt,” said Filippo Sona, the director of hotels for the Middle East and North Africa region at Colliers International, the property services company.

In January, Dubai International Airport recorded a drop of 22.7 per cent in travellers from Russia and CIS countries because of political and economic instability in the region.

To cope with the competition in the luxury segment, home-grown brands in Dubai are increasingly turning to international chains to tap the wider market.

The Habtoor Grand, which first opened in 2005, last month tied up with Marriott International’s Autograph Collection, a deal that will have a Marriott team managing the property and give access to the chain’s global reservation system and its 48 million loyalty members.

The rebranding “gives us the widest reach to the global market, Marriott’s global sales system and brand recognition”, said Sundaresh Iyer, the director of operations and development at Al Habtoor Group.

The property is the Middle East’s first Autograph Collection hotel, with the second coming up at the Lapita as part of Meraas’s Dubai Parks and Resorts in Jebel Ali.

Dubai hotels are expected to perform better in the second half of the year, with an average 1.4 per cent increase in revenue per available room for the whole year. “Occupancy levels in excess of 80 per cent do not suggest a sharp fall in [room] rate” for the whole year, said Ms Winkle.

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