Dubai's occupancy falters during ninth month of decline

Dubai's occupancy numbers faltered once again during the month of February. Whereas the first half of 2014 brought record tourism numbers to the emirate, Gulf News reported that occupancy rates dropped as much as five percent during the month of February 2015.

According to Gulf News, a research note released by Emirates NBD said the Dubai hotel sector is "facing headwinds," with the average hotel occupancy averaging at 86.2 percent last month. This is two percentage points lower than the same period last year. Revenue per available room (RevPAR) also dropped 7.7 percent year over year last month. And worse, this is the ninth consecutive month of decline.

Occupancy and RevPAR taking a hit is bad enough, but room supply in Dubai in February 2015 was up 6.8 percent compared to last year, while total supply in 2014 was up 7.8 percent year-over-year. The good news is that the emirate's 86.2 percent occupancy last month is up from January's 85.8 percent, though not by much.

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Emirates NBD Research analyzed data from STR Global, and predicted the government's plan to double Dubai's room supply between 2012 and 2020 could cause the now nine-month decline to continue. A further 11,500 hotel rooms in 38 new properties were under construction in January 2015, equal to 16 percent of the current supply. Meanwhile, 11,000 more rooms are in the planning stages.

"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 in the report.

Arabian Business contrasted Dubai's stagnation with Abu Dhabi's continued growth, noting Abu Dhabi's RevPAR grew 29.2 percent last month compared to February 2014, while occupancy is up 1.22 percent over last year to 80.6 percent. This may be due to Abu Dhabi currently operating about one third fewer hotels than Dubai, as well as RevPAR 33 percent lower than Dubai.

Most recently, Yotel announced plans to open a 438-room hotel in Dubai by 2018, designed by Arkiteknik International. In early March, Hyatt opened its fifth Dubai hotel with the Hyatt Regency Dubai Creek Heights, a 464-room hotel with 10,500 square feet of conference facilities.

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