New hotels could hurt Dubai's ADR

(The St. Regis Dubai, The Palm)

In Dubai, Nakheel’s Deira Islands are slated to have 28,000 hotel rooms and serviced apartments when the development project is fully complete. But the influx of so many rooms in Dubai seems to be having an adverse effect on the Emirate's ADR. 

Figures from STR show that Dubai has 22,000 hotel rooms in the pipeline, not including Deira Islands. In December, a peak season for Dubai's hotels, the average room rate in Dubai dropped 8.4 percent year-on-year to Dh824, according to STR.

It's not all bad news. Occupancy rates increased 3.2 percent to 79.7 percent.

"Dubai, as of March 31st, had the highest average room rates, at $227, and highest ­occupancy, at 86 percent, in the world," Philip Wooller, the area director for STR MENA, told The National. "The additional 28,000 rooms sounds incredible...Dubai currently has 89,000 rooms available with a target of 150,000 by 2020. The average room rate will drop as more affordable hotels appear and the demographics from source markets such as India and China require lower tariffs."

In spite of challenges, Dubai has recorded relatively strong performance. "Dubai saw the highest occupancy at 89.1 percent in the GCC while the beach-based hotels had the highest average room rate at $399," said Yousef Wahbah, Mena head of transaction real estate at EY.

The Deira Islands hotels will be a mix of third-party developers and Nakheel joint ventures with two huge resorts planned and another three on the drawing board.