Dubai hotels saw revenues drop between Jan-Apr – EY

Hotels across Dubai witnessed a drop in revenues during the first four months of the year, according to a new report by EY.

Revenue per available room (RevPar) fell by 6.4 per cent in Q1 and by 12.5 per cent in April on a year-on-year basis, it found.

While occupancy levels stood at 84.2 per cent in April 2015 as compared to 85.4 per cent in April 2014, the drop in average daily rate from $326 to $289 during the period mainly led to the drop in RevPar.

“The overall hospitality market in Dubai has seen a softer performance with the hotels dropping room rates in order to maintain their occupancy levels,” the report said.

The market is likely to be further impacted by a decrease in travel from Russia and Europe, given the weaker ruble and euro.

However, this should be offset by an increase in travel from emerging markets such as India and China, which are benefiting from sustained lower oil prices and increased purchasing power, EY said.

For the Middle East as whole, Cairo, Beirut and Doha performed strongly in Q1 2015, while the Egyptian capital along with Madina and Beirut posted the highest RevPar increases in April.

Yousef Wahbah, partner and head of MENA Transaction Real Estate, EY, said: “It is clear that a number of key markets are still demonstrating stable growth in their hospitality sectors despite the drop in oil prices.

“However as we move into the summer months and hotter weather, occupancy rates are expected to gradually decrease across the region.”

The region sees a drop in visitor traffic during the traditional summer months of July and August, and with Ramadan beginning in mid-June this year, hoteliers expect a dry spell.

Speaking to Gulf Business last month, Christophe Landais, MD of Accor Middle East said of the Dubai market: “With Ramadan in June, followed by the summer months of July and August, it is going to be quite hard. Certainly we don’t anticipate any growth again before the third quarter or fourth quarter.”

However, the EY report stressed that the overall market is set to fare better in the future despite increasing supply.

“The growth in the number of visitors to the region is expected to keep pace with hotel room supply,” said Wahbah.

“This is due to a number of factors, including an increasing demand for enhanced medical tourism, theme parks, retail outlets and current preparations that are underway for the FIFA World Cup 2022 and Dubai Expo 2020.”