Budget hotel bonanza on the way for UAE and Middle East

Budget hotels are well placed to cash in on the rapid growth in stopover traffic among airline passengers and the rapidly expanding low-cost carrier business, says analysts and hoteliers.

Budget hotels are well placed to cash in on the growth in stopover traffic among airline passengers and the rapidly expanding low-cost carrier business, say analysts and hoteliers.

As a result there is room for much more budget accommodation in the UAE and beyond, as the European trend for jumping on a cheap flight and taking several short breaks a year starts to take off in the Gulf.

Several budget properties have launched in Dubai this year, including an easyHotel, a Premier Inn and Holiday Inn Express lodgings next to Dubai International Airport.

"We will see more traffic coming through this market," said Rob O'Hanlon, the partner for the tourism, hotel and leisure industry at Deloitte in the Middle East. "Provided we're able to capture it there's business to be had."

Abu Dhabi is still undersupplied in the sector, but there are two Premier Inn hotels planned, including one at Abu Dhabi International Airport. However, in the short-term, rapid expansion in the budget sector in areas such as Al Barsha in Dubai has sparked hotel price wars.

Last month a Citymax hotel, Landmark Group's new budget accommodation brand, opened with almost 700 rooms in Bur Dubai, charging just Dh150 (US$40.83) a night.

That has now gone up to Dh192. But this is still putting pressure on older hotels in the area.

"What you see is now with the new mid-market brands entering the market, that possibly established two and three-star hotels that have been here for 10 years and longer, it's a wake-up call for them, because they have possibly neglected their upkeep," said Michael Weyland, the general manager of the hotel division at Landmark.

He said the launch of such large, more-affordable hotels would also help the conferences sector, as well as boosting tourism to the emirate.

"There has been a lot of new supply that has come into the market in a short time and that has put certain pressure on rates," said Darroch Crawford, the managing director of Premier Inn Middle East, a joint venture between Premier Inn and Emirates Airline.

But he said that compared with more established markets such as North America, Dubai still had some catching up to do in terms of budget hotels.

"There's not a lot of new properties planned," he said. "I think there's still more opportunity. What the low-cost airlines have done is grow demand. They don't just steal business. They grow business."

Mr O'Hanlon said that with the growth of low-cost carriers it would often be more expensive to fly between Delhi and Mumbai than it would be to fly from India to Dubai.