UAE hotel demand to outpace supply by 2020

Recent market oversupply, currency fluctuations and low oil prices to affect performance until 2018

Hotel demand will outpace supply by 2020, according to STR’s client relationships director Sarah Duignan.

STR client relationships director Sarah Duignan.

She made the pronouncement at the Accommodating growth in the Middle East presentation at the Hotelier Express Summit 2016, held on November 23 in Dubai.

Duignan said Middle East hotels’ revenue per available room (RevPAR) levels had peaked in October 2009 at AED1,300 ($353.9) and today current average rates over the last 12 months have fallen to AED560 ($152.4).

Hotel supply currently outpaces demand in the region, she said. There are 10,202 additional rooms due to open in Dubai before the end of 2016.

“According to STR data, supply continues to increase in the Middle East and Africa region (+2.9 percent in the second quarter of 2016 compared with the second quarter of 2015),” she said.

“This, in combination with a -4.0 percent drop in demand, resulted in declines across all key performance indicators for the region.”

The data shows that this downward hotel performance trend will continue over the next few years, until demand growth resumes in the run-up to Dubai Expo 2020.

However, despite the downward trend, the data also shows that the Middle East is the biggest growth market for new hotels as a percentage of existing supply.

STR’s October 2016 Pipeline Report shows 158,714 rooms in 554 projects under contract in the Middle East and 57,740 rooms in 310 projects under contract in Africa.

Among key markets in the Middle East and Africa, Makkah in Saudi Arabia reported the most rooms in construction, with 24,090 rooms across 15 projects. Dubai was the only other market to report more than 10,000 rooms in construction, with 19,687 rooms across 67 hotels.

“Low oil prices, currency volatility, supply increases and safety concerns in some countries still continue to affect the Middle East and Africa’s hotel performance,” Duignan added.

By 2020, demand for hotel rooms will outstrip supply, STR added. According to data predictions, occupancy levels and supply will continue to be very strong from 2017.

While there will be some growth in 2018 with the focus on Expo2020, the biggest growth will be in 2021, according to STR’s November forecast.

Source – Arabian Business

Posted by MODUL University Dubai on 29 Nov 2016

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