UAE: UAE Hotel Occupancy Rates Down

By any measure, there aren’t enough tourists to fill all the hotel rooms in the UAE.

The latest data released by research firm STR showed that due to a slow influx of holidaymakers, coupled with a huge supply of new hotels, occupancy numbers, as well as revenues and room rates in UAE, continued to drop in October compared to a year earlier. The average cost of hotel stay, in particular, slumped to an 11-year low.

Occupancy rates at hotels in Dubai dropped by 2 per cent to 78 per cent, while the revenue per available room (RevPAR), a key indicator of hotel profitability, was also down 11.6 per cent to Dh596.16. The price of hotel rooms, or average daily rate (ADR), dipped by 9.8 per cent to Dh764.63.

STR analysts attributed the performance to a decline in visitors from certain markets, owing to the drop in oil prices. The oil's decline, as well as the rise of the US dollar, to which the UAE dirham is pegged, has somewhat dampened the purchasing power of tourists from places like Russia and China.

The UAE's hospitality sector is one of the industries experiencing a slowdown in employment, with the number of online job postings within the industry registering a 66 per cent year-on-year decline in September, according to the Monster Employment Index.

This doesn’t mean that hotels are seriously low on guest numbers. In fact, STR recorded a "year-to-date demand increase" of 5.6 per cent, but this is not strong enough to fill the huge supply of hotel rooms coming on stream recently.

“Strong supply growth of hotel rooms has slightly outpaced a year-to-date demand increase in the market,” STR said in a statement.

Across the UAE, hotels reported that occupancy dropped by 2.9 per cent to 75.6 per cent. The average room rates (ADR) fell 9.6 per cent to Dh668.05, the lowest for an October since 2005.

As a result, RevPAR declined 12.3 per cent to Dh505.34. “October was the 22nd consecutive month of year-over-year ADR decreases in the UAE, due in part to consistent and significant supply growth (+5.1 per cent year to date),” STR said. At the same time, demand has remained strong, up 5 per cent year to date.

Hoteliers said that things are still looking good, with some of them expecting this year’s performance to surpass that of 2015.

“We are facing a higher rate compared to 2015. November and December are primarily busy months with a lot of business to capture in the market. The launch of several attractions and airlines dropping their prices are playing a big role for this increase,” a spokesperson for Millennium Plaza Hotel Dubai said.

Dubai has recently unveiled key projects, including the 1.5-million-square-foot IMG Worlds of Adventure and the 25-million-square-foot Dubai Parks and Resorts—home to three theme parks and one water park.

“With new developments on the tourism front, where Dubai has seen three new attractions opening in a span of just three months, Dubai is sure to win hearts of tourists and it is going to pull in a huge number probably exceeding earlier years,” said Moussa El Hayek, COO of Al Bustan Centre and Residence.