25% Of New UAE Hotel Projects On Hold

A quarter of the UAE hotel projects in the pipeline have been put on hold, while 54 per cent will be developed, according to a new study by property consultants Christie and Co.

The study also found that out of the 70,000 rooms in the pipeline, 21 per cent of the projects have been postponed.

“Projects are most likely on hold due to lack of financing,” explained Gavin Samson, managing director, Christie and Co MENA.

“In some cases, if the hotels are part of large master planned developments, these are possibly being reassessed and reactivated when market dynamics are stronger (this would apply more to markets like Abu Dhabi where there is an oversupply situation),” he said.

Dubai has almost twice the number of rooms in its pipeline as Abu Dhabi, while the UAE capital has almost twice the number as Sharjah, the study found. Between them, Abu Dhabi and Dubai make up over 75 per cent of the UAE’s supply of new rooms.

“Even with a pipeline of 20,000 rooms for Dubai, the outlook is positive,” said Samson.

“Although rates may soften, demand is expected to absorb the new supply. For Dubai, the market-wide occupancy in 2011 was a satisfactory 75 per cent and it would require an on-going year-on-year growth of between seven and five per cent to maintain this over the next four years,” he added.

Tourism is booming in Dubai, and earlier this week the emirate announced plans to build a new retail and tourism city.

The new project, called “Mohammed Bin Rashid City”, will include what is slated to become the world’s largest shopping mall and over 100 hotel facilities.
However, the supply-demand situation in neighbouring Abu Dhabi is highly imbalanced, says Christie and Co. There are 11,500 rooms in the pipeline against a current supply of almost 18,000.

“Abu Dhabi would need to meet the challenge of year-on-year demand growth of more than 20 per cent over the next two years simply to maintain last year’s market wide occupancy of 65 per cent, which is arguably at least five per cent below the ideal,” said Samson.

In terms of hotel positioning, in the both the emirates, the upper end of hotel brands including the up-market and luxury categories dominate the future supply comprising of approximately 73 per cent of the pipeline, said the study.

“This trend is unlikely to change in the short to medium term,” said Samson. “I would certainly like to see more budget and mid-market brands in the pipeline,” he added.