As Expo 2020 looms, Dubai developer offloads assets

The rise in visitors to theme parks, cultural attractions, Expo 2020 and in affordable hotels has put Dubai's hospitality industry on track for continued growth past 2020.
Hotel development is strong in Dubai, UAE, in anticipation of Expo 2020. Photo credit: Schmid-Reportagen / Pixabay

Dubai's Expo 2020 is getting closer, and as the emirate hurries to open a range of hotels to cater to the expected boost in visitors, at least one major developer is looking to offload assets rather than keep them. 

While development remains robust, Bloomberg noted some investors are seeing "gloomy prospects" for Dubai’s real estate market as a whole, and shares of Emaar Properties, Dubai’s largest listed developer, have fallen nearly 40 percent this year. 

This could explain why the company is taking steps to divest some of its assets, including some luxury properties in Dubai. Last month, Emaar Hospitality Group, a subsidiary of Emaar Properties, announced plans to sell its entire economic interest in a portfolio of five Dubai hotels: The Address Dubai Mall, Address Boulevard, Address Dubai Marina, Vida Downtown and Manzil Downtown.

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Abu Dhabi National Hotels is set to acquire the 1,000-room portfolio for an undisclosed price with the transation expected to close by year's end or early 2019.

As part of the transaction, ADNH will enter into long-term management agreements with Emaar Hospitality Group to continue operating the assets under is Address Hotels + Resorts and Vida Hotels and Resorts brands.

"Emaar’s hospitality business has recorded robust growth since its inception in 2007 and moving to an asset-light model will enable the business to unlock its true potential," said Mohamed Alabbar, chairman of Emaar Properties.

Dubai's Supply Remains Strong

Earlier this year, Dubai’s Department of Tourism and Commerce Marketing predicted the emirate would reach 132,000 guestrooms by the end of 2019. (Comparatively, at the beginning of 2015, Dubai had approximately 94,000 hotel rooms available, according to the GCC Hospitality & Leisure-Recreation 2016 report. It reached 100,000 rooms in November 2016.) By the time the Dubai Expo gets underway in October 2020, that number is expected to reach an estimated 164,000.

And development is still going strong: According to Lodging Econometrics, Dubai's pipeline had 169 hotels with 50,420 rooms as of November, a good sign that the emirate could meet its goals by the time the Expo begins.

 “Expo 2020 is driving growth in Dubai as the emirate aims to complete 160,000 hotel rooms in time to welcome an additional five million visitors during the event,” Frank Wolfe, CEO of Hospitality Financial and Technology Professionals, said earlier this week. “In preparation of the expected 25 million visitors, the city has made unprecedented investments in its infrastructure and hospitality sector to cater [to] the influx of travelers.”

The Tourism Vision for 2020, a plan to help develop Dubai’s tourism industry with the ultimate goal of getting 20 million visitors to visit the emirate each year by 2020, was approved in 2013, and has helped boost infrastructure and hotel development since then. Dubai announced initiatives for developers to open hotels in the emirate, prompting a rush to secure permits.   Ever since, global brands have been vying for top spots throughout Dubai, and for the UAE as a whole. 

The emirate's tourism numbers have been strong in recent years. Dubai received a record 8.10 million international overnight tourists during the first six months of 2018, representing a consistent increase on the same period last year. According to Dubai Tourism, the emirate’s tourism sector was worth AED109 billion per year at the end of 2017.

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