1m Indians, 1.5m Saudis in Dubai, but hotel rooms cheaper; how?

The tourism market in Dubai continues to be dominated by visitors from Saudi Arabia, India and the UK.

Saudi Arabia drove the largest number of visits to Dubai in 2014 (1.5 million visits), followed by India (0.9 million visits) and the UK (0.8 million visits) as highlighted in the latest “Middle East Hotel Market Insight Report” by Deloitte and STR Global.

The second edition of this report highlights key trends and analysis on the tourism, hospitality and leisure (THL) industry focusing on Dubai in particular.

Arrivals to Dubai in 2014 from the US fell by just over 3 per cent and almost 11 per cent fewer Germans visited. Most notable was the 15 per cent decline in Russians, who due to domestic economic challenges and the resultant impact on the exchange rate, has resulted in the mid and upscale Russian market seeking better value destinations.

Visitation from China and Iran grew at 24 and 41 per cent, respectively, indicating a growing appeal for Dubai from these source markets.

Dubai’s hotel room supply, according to data provided by STR Global, was 369 hotels in July 2015 which reflects a compound average growth rate of 5.25 per cent from the 233 hotels in 2006.

Over this period, the number of rooms in Dubai rose from 39,000 (2006) across all sectors of the market to 75,600 in July 2015.

Growth in demand for hotel accommodation in Dubai has slowed in 2015 compared to 2014 with growth of 5.1 per cent versus 6.4 per cent in 2014 and the rise in the supply of hotel accommodation over the same period has outpaced demand growth with 6.7 per cent growth in 2015.

This mismatch in hotel supply growth and demand growth has resulted in occupancy declining by a relatively modest 1.3 per cent. Average daily rates are as a result also lower but these more competitive room rates are necessary to drive tourism volume growth which is clearly the long term focus for Dubai.

“The continued growth in demand, albeit at lower levels of growth, fuelled by ongoing improvements in tourism infrastructure and strong hotel operating performance, has stimulated continued investor interest in hotel development in Dubai,” explains Grant Salter, Director, Tourism, Hospitality and Leisure Advisory at Deloitte Middle East.

“Despite the changing market dynamics in Dubai, demand for hotel rooms will continue to grow in 2015. The current drop in the average room rate will have a positive effect in maintaining the occupancy levels throughout the city and to some extent this shift was necessary to keep Dubai competitive as it moves towards achieving its targeted growth in visitors during the Expo year in 2020,” said Philip Wooller, STR Global Area Director, Middle East & Africa.

The Deloitte and STR report further looks at the luxury hotel sector in Dubai as well as the upper midscale and midscale sector.

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