Nepali billionaire ‘bullish’ about Dubai’s hospitality market despite oversupply fears

Nepali billionaire Binod Chaudhary, who is currently developing the Taj Vivanta hotel in Dubai, has said he is “bullish” about the growth of the emirate’s hospitality sector despite the tough market conditions.

Chaudhary’s diversified CG Group has operations worldwide, with plans to increase its hotel portfolio from 79 at present to 200 by 2020.

In Dubai, he is currently focussed on the 200-room luxury Taj property, which will be located in Jumeirah Lake Towers.

“I continue to remain bullish about the hospitality sector in Dubai. Hospitality is a business we have been doing across the world from New York to China and India and the ASEAN. So we are very confident that until the time that the last room is sold – it will be ours,” he told Gulf Business.

While hotels in Dubai recorded a strong average occupancy of 86 per cent during the month of May, according to a recent report by EY, revenue per average room dropped by 7 per cent, from $200 in May 2015 to $186 in May 2016.

Another recent report by JLL found that although Dubai recorded the highest average daily rate among major regional markets in the first quarter, at $234.88, it was down 10.1 per cent year-on-year in dollar terms.

An additional 10,000 new hotel rooms are expected to open in Dubai this year, of which 621 opened during the first quarter, according to the firm.

Chaudhary admitted that oversupply is a problem in the market.

“Of course too much has been built because everyone wants to benefit. In any market, when there’s too much supply, what will prevail, survive and excel will be determined by the product, location, brand and service standards,” he said.

“It’s a cycle. You can’t build infrastructure overnight, however sentiment changes very rapidly. So you have to be able to sustain in difficult times.

“There are a lot of hotels which have shut down and are unable to operate. And you also have properties which they are unable to open and you have distress sales.

“But I’m not worried. Of the more than 100 hotels that we are associated with worldwide, I don’t think any of them has shut down,” he added.

According to the billionaire, the company has been very careful with its hotel investments. However, he admitted that not every investor remains vigilant.

“The entry price has to be right. I would say majority of investors in the hotel business are driven by ego. They feel that ‘now that I have money everywhere else, I must be the owner of a hotel’. It has some kind of an unspoken arrogance and glamour to it – to be part of the ownership of a hotel that everyone wishes to go into,” he claimed.

“That’s where people start taking wrong decisions. When ego takes centre-stage, you don’t know whether you are doing the right project in the right location. You don’t know whether you are paying the right price.

“So one has to be very conscious – it’s a hard core business decision – you cannot be emotionally attached,” he advised.

Looking ahead, the company plans to introduce its other hotel brands including Zinc, Fern and Alila across the Gulf region.

“We see scope for further growth, especially in markets such as Saudi Arabia,” Chaudhary added.

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