More than a year after floating rumors of a partnership, Dubai-based Nakheel has signed a JV agreement with Thailand’s Centara Hotels and Resorts to build a 550-guestroom, $136-million beachfront resort on the Emirate’s Deira Islands.
The deal was signed in Bangkok by Nakheel Chairman Ali Rashid Lootah and Centara Chairman Suthikiati Chirathivat, and will be the first Centara establishment in the UAE. The resort is expected to have a soft opening in 2019 and a grand opening in 2020—just ahead of the Expo 2020, for which Dubai has offered numerous initiatives to hoteliers.
“Today’s signing is a key milestone in hospitality expansion, and the beginning of a long-term strategic partnership between Nakheel and one of Thailand’s biggest, most popular hotel operators,” Ali Rashid Lootah said in a statement.
Nakheel’s Dubai Growth
The project is the latest development in Nakheel’s expansion into Dubai’s hospitality sector and its second international joint venture for Deira Islands, which the company acquired in 2013 as part of a development plan. Over the summer, Nakheel and Spanish hospitality company Riu Hotels & Resorts commenced development of their AED900-million 800-room joint venture resort and waterpark on the islands. The hotel—Riu’s first in the GCC—is expected to open by the third quarter of 2019.
In September, Nakheel signed a letter of intent with Hilton Worldwide to manage a new DoubleTree hotel at Jumeirah Village Triangle. The company is also behind Dubai’s third St. Regis hotel (slated to open in 2018).
Pros and Cons of Dubai Development
As we’ve noted before, by the time the Dubai Expo gets underway in October 2020, Dubai will have an estimated 164,000 guestrooms in its hotels. As of the end of 2016, Dubai had 118 hotels and 33,053 rooms in the pipeline, according to Lodging Econometrics.
But with such a rapid influx of hotel rooms, some reports have suggested that Dubai’s hotel industry could already be oversaturated, with occupancy and room rates already affected. In December, a report from Ernst & Young claimed that the Dubai’s average daily rate had dropped 8.6 percent in November year-over-year. As such, revenue per available room for November dropped 3.6 percent.
For 2016 to 2017, Deloitte expects Dubai’s supply/demand gap to widen, and the declines are poised to continue into 2018. In light of falling profits and middling occupancy rates, some developers are delaying openings or opting to abandon projects in various stages of completion.
But even if development is rushed for the short term in anticipation of the 2020 festivities, those rooms may still go to use in 2021 and beyond. Dubai Business Events, the city’s official convention bureau, booked 129 bids and proposals for upcoming conferences, meetings and incentive trips in Dubai last year, a 79-percent increase over 2015. These events are expected to bring in an estimated 75,000 additional visitors to Dubai over the course of the next six years.
Dubai Tourism expects occupied roomnights in hotels and hotel apartments to reach 35.9 million, representing a 10.8-percent compound annual growth rate from the end of 2015 to the end of 2018. As such, the agency expects overall room supply to reflect similar growth, reaching 134,000 rooms by the end of 2018.