Ramadan slowdown for Dubai hotels as occupancy and room rates decline

The business slowdown at Dubai hotels maintained the down trend since January, with room rates failing to keep pace with last year’s average prices. Kamran Jebreili / AP Photo

Occupancy and room rates at hotels in Dubai declined last month because of slower demand during Ramadan and an increase in room supply.

The occupancy rate fell 15.4 per cent from the year-earlier period to 63 per cent, pushing the average daily room rate down by 8.6 per cent to Dh592.69, according to STR Global. Revenue per available room, a measure of a hotel’s profitability, fell 22.7 per cent to Dh373.53.

The supply of hotel rooms last month rose 4.6 per cent from the same period last year, while demand fell 11.6 per cent.

Hotels in the region typically come under pressure during Ramadan and look to boost revenues from food and beverage sales.

The business slowdown at hotels last month maintained the down trend since January, with room rates failing to keep pace with last year’s average prices.

Nevertheless, hotel operators remain upbeat about Dubai.

The US-based Wyndham Hotel Group expects to open the 497-room Wyndham Dubai Marina in the last quarter of this year. The world’s largest Tryp by Wyndham hotel, with 672 rooms, is expected to open in the Tecom area late next year.

“There is always the potential for increased supply to drive down average room rates. However, this can successfully be offset where the destination is able to generate more demand,” said Michael Zager, the group’s regional vice president for the Middle East and Africa.

Mr Zager said: “The UAE has historically been successful in this regard due to the continuous expansion of infrastructure and its transport network, with airlines adding new routes and connectivity. It continues to add new demand drivers such as sports venues, shopping centres and events.”

The US operator of mid-market and high-end hotels says demand has been growing for more mid-market hotels with the rise of new source markets such as India and China, as well as other parts of Europe.

In March, Wyndham Hotel Group opened a 146-room Tryp property in Abu Dhabi.

“Historically, some developers were primarily focused on prestige when it came to their property assets,” said Mr Zager.

Today, investors might be looking at optimising returns, or opportunities which offer lower construction costs.”

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