Dubai – Mubasher: Dubai has around 50,000 rooms in the pipeline due before the highly anticipated Expo 2020, however, most of these rooms are in the top-end market, a top hotel official has said.
Dubai’s hotel market has a "disproportionately" large number of rooms for those who prefer luxury stays, but many tourists demand economy hotels, a segment that does not have a major presence in the emirate, Simon Allison, CEO of UK-based hospitality investors association Hoftel told Arabian Business.
“It has a lot of luxury, upscale hotels, but a lot of the markets being developed, such as India and China, need 2-star, 3-star budget hotels. While some of the companies are entering the mid-market, the pipeline is still mostly upscale luxury,” Allison highlighted, indicating that the problem is not being addressed.
It is likely that the high-priced luxury hotel market will soften when the new rooms are added by 2020, prompting a possible decline in occupancy levels.
Dubai is one of the most expensive markets in the Middle East but compared to international cities like Paris and Hong Kong, it is not overpriced, Allison noted.
“However, between now and Expo2020, around 50,000 rooms are coming into the market, and Saudi Arabia has a similar or even bigger percentage increase. I’ve never seen any market, except possibly Las Vegas in the boom times, absorbing that many rooms without a hit to occupancy,” he stated.
“Just mathematically, even if you are growing demand at 7% a year, which you are, if you’re adding properties at 14% a year, you’re going to have a hit to occupancy,” the Hoftel official highlighted.
In 2017, Dubai marked strong occupancy levels on the back of lower rates as hotels introduced discounts to attract business.
The addition of new options including the Dubai Frame, theme parks, and new airports, will contribute to attracting tourists to the emirate this year, he added, noting that 2018 occupancy will most likely be subdued, although demand would increase ahead of and during the Expo 2020.
After the mammoth-sized exhibition ends, however, occupancy may be hit hard as these projects are set to remain, even if they are built for a short-term project.
“The year after such a big event is often very tough, but then again, this is the reason to continue to build things to do, so I don’t see any long-term issues with the market,” Allison concluded.
