During the first three months of the year, hotels across the emirate recorded an occupancy level of 86.3 per cent, showing a 2.7 per cent increase compared to the same period last year.
The increase in bookings was more significant in affordable properties than in posh, high-end hotels, with Dubai’s “midscale and economy classes” experiencing a combined 7.2 per cent year-over-year growth in room uptake and luxury hotels posting a rather moderate increase of 0.7 per cent.
The figure is impressive, considering that Dubai has a huge supply of hotel rooms and more properties are constantly coming on stream.
However, the average cost of rooms per night fell 6.4 per cent to Dh795, while the revenue per available room (RevPAR), which has consistently been on a decline for two years, dropped 3.9 per cent to Dh686.
According to STR, hotel operators’ revenue per available room did continue to fall during the first quarter of the year, but the takeaway from the preliminary data is that the hospitality sector is on track for a recovery.
“Because Dubai has seen two years with consistent RevPAR declines, STR analysts see the [first quarter] occupancy growth as an indicator of performance recovery,” the company said in a statement.
Philip Wooller, STR’s area director for the Middle East and Africa, said the strong demand is apparently driven by the recent visa policies issued by the UAE government.
“A factor 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,” Wooller said.
“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.”
Early this year, the UAE government issued a decree granting visas on arrival to travellers from Russia, a major source market for the country’s hospitality industry. For the past two years, the UAE welcomed 600,000 Russian visitors and the number is forecast to grow with the new visa policy.
A similar decree was issued by the government in 2016, granting Chinese tourists entry permits on arrival. The new policy has encouraged more Chinese tourists to visit the emirate, with the number of guests from China reaching more than 300,000 between November 2016 and March 2017.
Dubai still has a huge inventory issue to face, though. There are more than 42,000 rooms currently under contract in Dubai, the largest pipeline of any city in the world, according to Robin Rossmann, STR’s managing director.
Rossmann said the strong occupancy levels are, however, “impressive,” given the significance of supply growth in the market.
“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.”