Increasing supply an ongoing detriment to Dubai

Hotel occupancy rates and revenues have dropped in Dubai over the past year due to increasing supply, according to recent research from Emirates NBD bank and as reported by Arabian Business.

The supply of hotel rooms in Dubai last month was up 6.8 percent compared to February 2014 and total supply in 2014 was up 7.8 percent year on year.

This is putting pressure on occupancy rates and revenue in the emirate, according to the research note.

Average hotel occupancy in Dubai stood at 86.2 percent in February, up slightly from January’s 85.8 percent but more than two percentage points lower than the same month last year.

Revenue per available room (RevPAR) also dropped last month, by -7.7 percent year on year, representing the ninth consecutive month of contraction.

Emirates NBD Research analysed data from hotel information group STR Global, and predicted that government targets to double the supply of hotel rooms in Dubai between 2012 and 2020 mean the downwards trend is likely to continue. A further 11,500 hotel rooms in 38 new hotels were under construction in January 2015, the analysis showed – around 16 percent of the current supply. A further 11,000 rooms are in planning.

“As demand growth is only expected to catch up with supply closer to the end of the decade, hotels’ pricing power is likely to continue to be eroded in the short term,” Emirates NBD said.

By comparison, the hotel sector in Abu Dhabi is continuing to grow. RevPAR grew by 29.2 percent last month compared to February 2014, and occupancy rates rose by 1.22 percentage point over the year, to 80.6 percent.