Dubai hotels should expect ‘new norm of 70-75% occupancy’

Visitors, seen through the blinds of the lobby windows, take in the sights of the Dubai Creek at the Crowne Plaze hotel. Antonie Robertson / The National

Dubai hotels can expect occupancy levels of 70-75 per cent to be the new norm in 2016, a report released today said.

The prediction, by Deloitte Corporate Finance in its Real Estate Predictions Report for Dubai, is for occupancy to fall from 77.5 per cent last year.

Dubai’s tourism sector has been hit during the past year by declining oil prices which have affected economic activity in the countries which tend to feed the emirate’s hotels. Brent oil was today trading below $29 a barrel.

The softening market has also been compounded by regional security concerns.

However, Deloitte said that visitors could be encouraged by falling room rates over the next 12 months.

“As operators compete for occupancy, it is expected that Average Daily Rates (ADR) will soften further, which should encourage growth in visitor volumes required to support the investment in tourism infrastructure,” it said.

It said in the report that 2015 saw average occupancy fall approximately 1.4 per cent, while the ADR fell 7.4 per cent to Dh797.

“This was primarily due to new supply growth (6.8 per cent) outpacing demand growth (4.4 per cent),” it said.

It added that the relatively moderate falls “should not be viewed negatively, as Dubai still remains one of the best performing hospitality market globally” with regard to occupancy levels, comparing well against the likes of New York at 84 per cent, London at 82 per cent, Paris at 78 per cent and Berlin at 77 per cent.

Deloitte expects room inventory to increase by 14 per cent this year to 76,500 keys, and demand growth will catch up with supply growth in the run up to Expo 2020.

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