Hotel room rates in Dubai expected to stay steady over next three years

Room rates in Dubai, among the most expensive in the world, are expected to stabilise in the next few years as more supply comes into the market, says STR.

Le Royal Meridien Beach Resort & Spa in Dubai Marina. Sarah Dea / The National

Hotel room rates in Dubai are expected to stabilise next year and remain steady for the next three years even as new supply enters the market, according to research company STR Global.

“There is no oversupply of rooms in Dubai and the city is still in its infancy,” said Philip Wooller, STR Global’s area director for the Middle East and Africa.

“The demand is still strong and as long as it remains strong, there is opportunity in the market. And as it moves towards 2020, there has to be some correction in the rates.”

About 38 hotels are being built in Dubai, accounting for 11,000 rooms that are expected to be available over the next two to three years, according to STR Global.

Hotel room rates this year are expected to be 10 per cent below last year’s, and they are expected to decline only 1 to 2 per cent next year.

Since 2006 the supply of hotels has increased – and so has demand.

In 2020, Dubai is expected to have 107,905 hotel rooms, up from 29,041 rooms in 2000, according to STR Global.

But as economies slow down in Europe, China and other emerging markets, that is expected to curb the spending power of tourists, economists say.

“Russia, China, India and Pakistan are big [tourist source] markets and the currency fluctuations are having an impact on how much they can spend when they come here,” said Khatija Haque, an analyst with Emirates NBD.

During the first eight months of this year, Dubai was the fourth-most costly city in the world for tourists after Paris, New York and Hong Kong, with an average daily room rate of US$223 and an occupancy rate of 76.7 per cent.

For the whole of last year, the average daily room rate was $241 in Dubai, the third-highest in the world after Paris and New York, with an occupancy rate of 78.5 per cent.

Much of the enthusiasm in the hospitality industry hinges on the increasing number of passengers travelling through the Dubai International Airport and the expanding Emirates fleet.

Dubai International is projected to handle 90 million passengers in 2018, up from 70.4 million travellers last year.

The growth in the number of hotels in Dubai is expected to dip after 2020.

“The supply will slow down between 2019 and 2020, and there will be little growth [in supply] after 2020,” said Mr Wooller.

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