Stable supply helps boost hotel fortunes

Dubai's hotel industry recorded a 16.5 per cent August year-to-date demand growth led by massive increases in the luxury/upper upscale segment, compared to the same month of the previous year, according to STR Global, the provider of hotel market information. The new study reveals that demand growth in terms of total rooms occupied and new hotel supply were "unequally" spread between all six segments tracked by the firm. While the demand growth in Dubai's luxury/upper upscale segment of hotels recorded a 17.6 per cent increase, moderate new hotel supply was up 9.4 per cent, resulting in average room rate growth of 3.1 per cent at Dh940.87, according to STR Global's analysis. Compared to this, the midscale/economy segment of Dubai hotels experienced the strongest new supply growth of 11.3 per cent. Strategic location "The Dubai hotel market has managed to leverage its strategic location as a hub between continents and was valued as a safe destination during the Arab Spring," Elizabeth Randall, managing director of STR Global, said in a statement. In addition, "modern infrastructure, new hotel inventory and delayed openings" have allowed the market to balance supply and demand, she said. "This is good news for hoteliers who can now build their occupancy and rate," Randall said. As per the STR Global estimates, branded economy and midscale hotels have been growing over the last few years in Dubai with the diversification of hotel offerings, which were, until recently, focused mainly on the upscale to luxury segments. The additional new supply in the midscale/economy segments, combined with slightly lower demand than the market, resulted in an average room rate decline of 2.7 per cent and the lowest absolute level of occupancy at 69 per cent, according to the STR Global report. Highlighting future trends, STR Global Hotel Forecast for Dubai indicates that revenue per available room (RevPAR) growth is anticipated to reach between 8 and 9 per cent by the end of this year. RevPAR is an industry benchmark for performance. Meanwhile, demand growth for the full year is expected to remain positive — close to 15 per cent for Dubai hotels, according to STR Global estimates, as international visitors continue to increase beyond eight million by the end of 2011. In 2012, however, new supply growth is expected to reach 9.6 per cent, the hotel information firm says, causing both rates and occupancy levels to slow down. Pipeline data from STR Global indicates that 13,000 rooms are under construction in Dubai with 21,000 more having been announced.