Dubai Hospitality Market 2017 Review

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22/05/2018 - Hospitality

Dubai is home to the world’s third-largest hotel pipeline behind New York and Houston, according to the latest Global Construction Pipeline report released by Lodging Econometrics. Dubai currently has 145 projects and 40,733 rooms under construction, the report states. Dubai also has the world’s second-largest inventory of five-star hotels, with 61 properties in the category.

With the city already ranking among the world’s largest hospitality markets, TFG Asset Management constantly evaluates industry trends to ensure our properties meet market demand.

TFG Asset Management is pleased to share our review of Dubai’s overall market performance in 2017.  

With Dubai’s hotel room inventory increasing substantially over the last two years, competition has risen sharply. As a result, ADR has fallen 13.8% according to STR Global, with this figure forecast to decline further in the next two years. Bur Dubai (-40%) and Downtown Dubai (-25%) have experienced the biggest drops in ADR respectively while The Palm and Airport hotels have been the most resilient, the later experiencing increases in ADR. In terms of RevPAR, JBR and Dubai Marina properties have only been outperformed by hotels located in the vicinity of Dubai International Airport, which attract a large number of stopover guests. 

Occupancy rates have risen marginally (+1%) over the last two years, despite demand outpacing supply in 2016 and 2017. According to DTCM, 9,098 rooms have joined Dubai’s hotel inventory over the last two years. This has driven competition among operators and led to many discounting rates to capture occupancies.

At TFG Asset Management we strongly disagree with this approach as we believe it is ultimately counterproductive in the long run. From 2019 onwards, we anticipate demand will outpace new supply leading to an increase in overall profitability. It is extremely important to remain committed to long-term strategies that will enable us to reap the benefits from resurgent market conditions.