According to the latest data from STR, Dubai's hotel industry recorded strong occupancy levels during the first quarter of 2017, despite continued and significant supply growth. Based on preliminary data, Dubai recorded an 86.3-percent occupancy level, a 2.7-percent increase compared with the first quarter of 2016.
“A factor that likely played a big role in Dubai’s occupancy growth was the UAE government’s recent decisions to grant visas on arrival for Chinese and Russian nationals," Philip Wooller, STR’s AD for the Middle East and Africa, said in a statement. “While Dubai continues to add new supply, it also continues to add new leisure attractions, and expanding the market’s range of potential visitors can only help drive hotel demand and profitability.”
The middle- and lower-tier hotel classes pushed occupancy increases. Dubai’s midscale and economy classes experienced a combined 7.2-percent year-over-year increase in occupancy, while luxury hotels saw more moderate growth of 0.7 percent. Upper-upscale hotels reported a 1.1-percent decline.
STR analysts noted that the midscale and economy classes had less substantial supply growth compared with other classes during Q1. However, the upper midscale class, which recorded the highest rate of supply growth at +13.9 percent, also posted a substantial 6.7-percent increase in occupancy.
“With more than 42,000 rooms currently under contract, Dubai has the largest pipeline of any city in the world,” Robin Rossmann, STR's MD, said in a statement. The emirate's demand is impressive, he added, considering the significance of supply growth in the market.
“With more than 42,000 rooms currently under contract, Dubai has the largest pipeline of any city in the world,” Rossmann said. “The market faces several challenges over the next few years in maintaining a demand level that can offset some of this supply growth. On the positive side, Dubai continues to attract substantial leisure business, so this is definitely one of the top markets in the industry to keep an eye on from both a supply development and performance perspective.”