(MENAFN - Khaleej Times) The UAE's thriving hospitality industry, enjoying an impressive track record for its consistently high occupancy rates and sustained capacity expansion drive, is set for a new phase of exponential growth that is expected to catapult the Emirates to the ranks of the world's most sought-after destinations for international visitors by 2020, when Dubai will be hosting the World Expo.
The UAE is already among the top five countries in the world for new hotel openings over the past five years. The hospitality industry in the UAE saw positive growth throughout the first 11 months of 2013. The UAE also has the longest pipeline of rooms under construction with an additional 32,107 rooms in the offing while the Middle East/Africa hotel development pipeline comprises 483 hotels totaling 117,450 rooms.
Massive-scale expansion of international airports in the UAE, including what promises to be world's largest - Al Maktoum International with a capacity for 160 million annual passengers - and the fast pace of growth being recorded by the country's three industry-leading airlines have already been driving a relentless surge in the number of international visitors and holidaymakers to the UAE. As a result, almost all hotels across the UAE have been reporting impressive occupancy rates as well as steady growth in average daily rate, or ADR.
A report by STR Global on hospitality supply growth around the world reveals that only the US, China, the UK and India are ahead of the UAE. According to a forecast by Alpen Capital, hotel room supply in the UAE from 2012-2016 will increase by 5.3 per cent annually, taking the number from the current 96,992 hotel rooms to 125,383 rooms by 2016 in tandem with a surge in the influx of tourists.
Dubai, the regional hub for hospitality, tourism and shopping, is the world's biggest growing market outside of China since 2008 in terms of new hotel openings. The city has been named a top 10 global destination for business, leisure and shopping tourists, in a research exercise by Genesis Consulting ME. Hotels in Dubai exceeded the regional and national average and recorded a 9.9 per cent growth in ADR to 290.68.
According to a report by STR Global, in November, hotels in the region recorded an average 64.6 per cent occupancy at 180.88 ADR, resulting in 116.78 revenue per available room (RevPAR). These represented a dip in occupancy of 1.7 per cent, an increase of 6.8 per cent in ADR and an overall 4.9 per cent rise in RevPAR. During the first nine months, Dubai hotels witnessed significant growth in revenues, with total revenues up by 17.1 per cent, reaching Dh15.33 billion. Total guest nights also recorded similarly impressive rises, up 13.7 per cent to 30,874,916 from 27,163,974 in the first nine months of 2012.
EC Harris, the global consultancy, said that more than 10,000 five-star hotel rooms in Dubai are now in need of refurbishment. It estimates that there were 23,500 five star rooms in Dubai in 2012. However, this number has grown significantly throughout the last 18 months as operators launch new properties to meet growing demand and cash in on lucrative room rates.
The Construction Pipeline Report released by STR Global predicts that Dubai's hotel room capacity will grow 28.6 per cent in 2013 with 17,409 rooms in the pipeline. Dubai has also been named a top 10 global destination for business, leisure and shopping tourists in a research exercise by Genesis Consulting ME. Alpen Capital said with tourist arrivals in the UAE likely to grow at a compound annual growth rate of 5.3 per cent between 2012 and 2022, hotel supply is expected to increase at 5.3 per cent from 96,992 hotels in Dubai and Abu Dhabi to 125,383 hotels in 2016.
Dubai's hospitality industry has received a new fillip with a move to license holiday homes. His Highness Shaikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, issued a decree to help develop the tourism industry by increasing the range of accommodation available to visitors - with the sector currently bursting at the seams. There are currently 100 per cent occupancy rates at hotels during the peak season. The decree states that the Dubai Department of Tourism and Commerce Marketing (DTCM) will have the authority to grant licences to those wishing to rent out furnished residential properties on a daily, weekly or monthly basis, according to the Dubai Media Office.
DTCM director-general Helal Saeed Almarri said regulating the rental of private properties as holiday homes would have a considerable positive impact on both tourism and real estate. The DTCM will define the requisite standards for the holiday homes that will be classified as either 'standard' or 'deluxe.' Almarri said in order to achieve Dubai's headline objective of 20 million visitors per year by 2020, there is a need to both increase the overall stock of hotel rooms in Dubai and widen the range of options for visitors.
"In recent years the number of three and four star establishments has increased, but it's vital that we continue to engineer the growth of this range," he said.
Saudi Arabia, India, the UK, USA, Russia, Kuwait, Germany, Oman, China and Iran made up the top 10 source markets for January to September 2013, mostly unchanged compared to 2012. A number of hotel properties are either under construction or in the planning stages in Dubai. Investors in new hotels will be granted a waiver on the fee for a period of four years from the date the permit to construct is granted and provided that this date is between October 1, 2013 and December 31, 2017.
"While our Tourism Vision has an end date of 2020, our strategy is focused on continual growth year-on-year, and we want to see the destination offer noticeably broaden every year. The equation is simple - the sooner the property opens, the bigger financial incentive the hotel owner will receive," said Almarri.
Standard and Chartered said the Expo 2020 would have positive implications on three key parts of the economy: housing, infrastructure and hospitality. On the hospitality front, the authorities estimate that 25 million people are likely to visit the Expo, of which 70 per cent will come from outside the UAE. However, one key challenge for Dubai is to maintain tourist inflows afterwards to prevent an oversupplied hospitality sector.
"We see the hotel sector as one of the main beneficiaries of growth generated by the event. To accommodate the significant inflow of tourists, the hotel stock will have to expand. Since 70 per cent of the 25 million visitors are expected to come from outside the UAE, Dubai will need to accommodate 17.5 million tourists in the months around the Expo," it said.
Dubai will require around 43 billion to significantly upgrade its infrastructure for Expo 2020 that may generate additional revenues in the range of 25-35 billion, studies show.
Deutsche Bank said a bulk of the 43 billion spending would go into expanding the hotel and leisure industry, while around 10 billion will be spent to improve transportation infrastructure. The Al Maktoum International Airport, the newly developed airport near the Expo site, when fully completed will be able to handle 12 million tonnes of cargo and 160 million passengers annually, making it the largest international airport by some margin. Dubai has also initiated an expansion plan for its existing Dubai International Airport to increase its existing capacity from 60 million to 90 million passengers per year by 2018.
Habib Khan, GM of Arabian Courtyard and CEO of Planet Group, said his group would record a year-end occupancy of 86 per cent this year, compared to 82 per cent in 2012.
"Expo 2020 will definitely help us shift our business mix to higher spending business travellers over the years while maintain a decent occupancy at an improved ADR in a passage of time. We will be closing the year 2013 with ADR of Dh525 and for 2014 we are projecting the ADR of Dh595.
Moussa El Hayek, COO of Al Bustan Centre & Residence, said 2013 set a new record for his hotel as it achieved year-round occupancy of 85 per cent which is 12 per cent more than 2012. "All indications support the view that 2014 will be another year of growth for Dubai's hospitality industry."
Ayman Ashor, GM of Tilal Liwa Hotel, said his hotel has managed to exceed by two point in total occupancy in 2013 compared to 2012. Expo 2020 will have a big positive impact on business trends in the coming year. Benefits shall not be only limited to Dubai. It will also be felt across other emirates, he said.
Samir Arora, general manager of Ramada Downtown, said activities related to Expo 2020 would only start in the next couple of years and will not have an immediate effect in 2014. However, Dubai as a destination will continue to evolve due to Emirates Airlines which continues to add new aircraft every month and fly to newer destinations.
Iftikhar Hamdani, GM of Ramada Hotel and Suites Ajman, said the demand for 2014 would be more than 2013.
"Without extending the inventory, we will not be able to cater to this demand. We need to increase at least 200 more rooms in Ajman due to this high demand."