_Strong Demand Generators Expected to Boost the Hospitality Market

The UAE’s hospitality market remained subdued in 2016 on the back of weaker macroeconomic conditions, further strengthening of the USD, and a strong supply pipeline. In Dubai, hotel occupancy rates maintained their stability on an annual basis registering 77% YTD Nov 2016; the highest rate amongst its regional peers. Meanwhile, average daily rates (ADR) dropped 12% YTD Nov 2016 compared to the same period last year. This resulted in a 12% decline in revenue per available room (RevPAR).

In Abu Dhabi occupancy rates dropped 4% on an annual basis recording 71% YTD Nov 2016. Given the emirate’s dependence on corporate tourism, the sector suffered from low demand on the back of softening global economic conditions. In turn ADR and RevPAR declined 11% and 14% respectively over the same period.

The short term outlook for the hospitality market in the UAE remains clouded by the continued appreciation of the USD and prevalent economic uncertainties. However, the delivery of Dubai’s theme park complex along with the Opera District and other demand generators is expected to drive demand for Dubai’s hospitality market in the next 12 months. Meanwhile in Abu Dhabi, the delivery of more cultural and entertainment facilities is expected to stimulate visitation.

Looking ahead, and amid a strong supply pipeline, hotel operators need to diversify their products to offer more budget accommodation to cater for diverse travellers. This is particularly true as 2016 year-end figures reveal a growing percentage of visitations from non-traditional source markets. Introducing more affordable options will not only balance the hotel supply, which is currently skewed towards the luxury market, but will continue to broaden the country’s tourist base and ensure the UAE remains a competitive tourist destination.