Abu Dhabi to be selective on new hotel licences

The Abu Dhabi Tourism Authority (ADTA) said it will be "selective" in the issuance of new hotel licences. "We have not completely stopped issuing licences. We still receive applications and are studying them on a case-by-case basis," Nasser Al Riyami, Director of Tourism Standards at the tourism authority, was quoted saying in a Reuters report. The clarification came out after a local newspaper reported that the tourism authority would be completely freezing the issuance of new hotel licences in the capital. Al Riyami said the reported freeze was incorrect. According a source in ADTA, prospective investors are initially invited to attend an investment awareness session in which all the salient facts of the investment scenario are explained in full before they are allowed to proceed with their licence application. The emirate's hotel industry has been going into an oversupply phase as hundreds of new hotel rooms have come online in the past few years. The number of rooms in the capital is even expected to double in the next four years, according to hospitality consultants. It appears to be a reaction to the oversupply," said Guy Wilkinson, Managing Partner at Viability, a hospitality consulting firm. "The government is taking into account the suffering of hotels that have been struggling to make enough money so in that sense it's good." Last year, Abu Dhabi recorded occupancy levels of 69 per cent, an increase of 7 per cent over 2010, the tourism authority reported. However, average room rates dropped 14 per cent to Dh490 and they're expected to drop another 10 per cent this year. In November 2011, there were 43 confirmed hotel projects in Abu Dhabi which would bring more than 14,000 new rooms onto the market, according to Viability data. "The decision to freeze or limit new hotel licences does not surprise me as similar controls were enforced in the 1990s, specifically the controlling of liquor licences. In addition, the Abu Dhabi government has an equity stake in many hotels and they have vested interest in maintaining reasonable occupancy levels," said Peter Goddard, Managing Director of TRI Hospitality Consulting. "The short-term effect on occupancies and average daily rates of limiting hotel licences is likely to be insignificant, albeit medium to long term, less number of hotels will mean higher occupancy and higher average daily rates," Goddard said. "Looking at this from the long term perspective you could say it's a negative measure," Wilkinson said. Wilkinson explained that the measure could be damaging in the long run if the momentum is slowed down for too long. "The question is: until when?" So much work has been put into promoting Abu Dhabi as a tourism destination, one that hospitality consultants believe is going to push the number of incoming guests much higher year after year. According to the tourism authority's 2011 report, Abu Dhabi recorded "its most successful year" with over 2.1 million people staying in the emirate's hotels and hotel apartments, beating its target of 2 million. Wilkinson said that if the promotion of Abu Dhabi continues with the same momentum, then there will be a need to allow hotels to come online in order to meet the demand. If Etihad continues doing its "fantastic promotion" then there will be a need for a balance between supply and demand, he said. "It's crucial for them to get their timing right, on when to pick up their speed again," he said