Dubai Steps In To Redress Its ‘Unhealthy’ Luxury-Hotel Imbalance

A company owned by Dubai’s government plans to open four hotels in the emirate next year to expand the supply of mid-priced rooms in a market dominated by luxury accommodation, its chief executive officer said.

Wasl Asset Management’s Hesham Abdullah Al Qassim said the three-star properties will each have 150 to 200 rooms and will be managed by Hilton Worldwide Holdings Inc. and Hyatt Hotels Corp. Wasl plans to build 19 hotels before end of 2017, he said.

“We want to fill the gap,” Al Qassim said by phone. “If you look at what’s available in the market you’ll find that more than 50 per cent are five-star hotels. This isn’t healthy.”

Dubai, known for iconic properties such as the sail-shaped Burj Al Arab, has been seeing a decline in occupancy and profitability at its hotels as more are constructed, according to STR Global. Five-star hotels in the city cost Dhs2,000 ($550) or more per night, while three- and four-star hotels command nightly rates of Dhs367 to Dhs735, according to Filippo Sona, director of hotels in the Middle East and North Africa at Colliers International.

Wasl already owns 10 hotels and two golf courses in Dubai. The company is also Persian Gulf city’s largest landlord with more than 30,000 homes.

Dubai aims to double its hotel rooms to 160,000 by 2020, Helal Saeed Almarri, director general of the Dubai Department of Tourism and Commerce, said in March. The emirate is encouraging developers to build affordable hotels to cater to business travelers and families on holiday, he said.

Lower Prices

Occupancy rates dropped 2.5 per cent to 85.5 per cent in November as the number of rooms climbed 7.3 per cent, STR Global said in a Dec. 10 report. Revenue per available room slid 9.2 per cent, while average room rates fell 6.9 per cent to Dhs977.84 ($266), according to the report.

Wasl built a twin tower Hyatt Regency complex on Dubai Creek and for the first time will sell properties to foreigners. One of the towers includes 463-rooms, five-star hotel set to open in March that will be held by the company. The second tower has 405 serviced apartments for sale starting on Dec. 15.

“We wanted to enter the freehold market with a completed project, where buyers can see and touch the homes they are buying before they buy,” Al Qassim said.

Next year, the company plans to build two housing projects with a wide range of prices, the CEO said. “We will always hold 30 per cent to 40 per cent of any project for leasing,” he said.