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HOSPITALITY SECTOR IN DUBAI GOING STRENGTH TO STRENGTH

Dubai’s hospitality sector is going strength to strength. Driven by increase in tourism inflows and rise in business activities, the overall outlook of the sector appears robust. Many of the ambitious hotel projects which were shelved off or delayed during the 2008 crisis are back on track. In addition, numerous new projects have been announced to capitalize on the anticipated rise in tourist inflow in the mid to long run due to increased government spending coupled with winning of global events such as World Expo 2020.

The boom in the sector has been reflected in the form of rise in occupancy percent in 2013, which has reached 80 percent in 2013, notwithstanding the addition of 2780 rooms in the 3, 4 and 5 star categories, indicating the emirates effectiveness in absorbing the new supply. The Average Room Rate (ARR) was registered at AED 1022 (USD 278) leading to a Revenue per Available Room (RevPAR) to AED 815 (USD 222); up from AED 771 (USD 210) in 2012. Hotels have also experienced increased revenue through their F&B sales as well.

It can be stated that the hospitality sector, which received 11 million tourists at an average of 3.78 days in 2013, is booming on the backdrop of an expanding tourism sector. The present rise is rooted partially to the Arab Spring Crisis; as Dubai on account of its peaceful environment and plethora of hotels and tourist attraction has been beneficiary of the ongoing crisis in Egypt and Turkey, helping it to capture a substantial chunk of regional tourists, who otherwise would have gone to such places. Crisis in other places such as Pakistan has also helped in stimulating the tourism in Dubai, as indicated from the fact that almost all the flights from Pakistan to Dubai are booked till May.

Nevertheless, the close coordination between different entities is also catalyzing the emirates rising tourism sector. The Dubai Tourism and Commercial Marketing (DTCM) with government backing is not keeping any stone unturned in aggressively marketing the destination across the globe. Similarly, Emirates Airline and Fly Dubai, local airlines of Dubai are relentlessly expanding across the globe either directly or through seeking meaningful collaboration. Thirdly, the existing Dubai International Airport, which has an annual capacity of 60 million and is growing at 12.5 percent annually, is set to supersede London’s Heathrow airport in terms of international travellers.

Additionally, the growth of Dubai’s hospitality sector is also strongly cross-linked with the economic resurgence of the emirate. Once after falling off the pedestal in 2008-10 periods pertaining to global economic crisis and over speculation of property markets, Dubai’s economy started recovering back in 2011 and is now stable to certain extent. Last year in 2013, the GDP growth was estimated at 4.7 percent, highest in the post-crisis period. The growth of the GDP has been driven on the account of rise in the real estate, retail and wholesale trade, manufacturing, tourism and hospitality developments. The economic growth has also translated in terms of rise in business travel and higher attendance in meetings and exhibitions in addition.

In the mid run from 2014-2016, Dubai’s hospitality sector could be estimated to grow at a rate of 12-15 percent. The period should see an extension of 130-150 new hotels and approximately 30,000 new rooms, taking total number of rooms to 114,000 from existing 84,500. The market might be affected a bit, due to normalcy coming back to Egyptian and Turkish market. Nevertheless, the small dip should be dominated by the government backed extensive marketing and rapid extension of the transport sector as indicted earlier.

In the longer run, the hospitality market should get further boost, which will be primarily driven by Dubai’s strategic objective to boost its tourism inflow to 20 million annually by 2020 and hosting of the world expo 2020 which is expected to attract 17.5 million international visitors. Based on our discussion with industry insiders, by 2020, Dubai plans to add 66,000 new rooms, reflecting an annual growth of 11.25 percent. In this regard, government is also taking deregulatory majors to facilitate construction of new hotels.

Our research findings indicate positive signs/sentiments for investors who are willing to invest in hospitality industry. The nearby time period will definitely oversee more number of hotels, resorts, conventions, tourist and shopping attractions. Not to mention restaurants and food outlets. Hence, at Research Konnection, we believe this is a perfect opportunity to capitalize from, for the hospitality chains that are eyeing to expand in UAE and wider Middle East.

Research Konnection

This research report is compiled by Research Konnection Team; a Dubai based market research and business consulting firm that is focused on capturing latest insights of major events across various sectors and industries in UAE. If you are looking for more research, information and qualitative/quantitative data or want us to prepare feasibility studies, then feel free to contact us on waqas@researchkonnection.com. 

Author: RKonnect
The author is the Managing Director of Research Konnection, a Dubai based market research and consulting firm that helps local and international companies to identify emerging business opportunities and successfully expand in the Gulf region. The author can be reached at waqas@researchkonnection.com
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