ME oversupply to hit room rates
A new study offers a true view of the regional hotel and retail markets: 30 new hotels in Dubai and a quadrupling of room numbers in Doha, among other key findings.
The increase in room supply is expected to cause hotel operators to adopt competitive pricing, which is likely to result in a decline of rack rates and revenue per available room.
The report, a regional real estate analysis by Colliers International, looked at key city markets around the region.
In Dubai, the report says, hotel projects have been hit by long delays, but the flow of new properties is about to turn into an avalanche, with no less than 30 new four- and five-star hotels under construction. The total number of rooms will grow by 33 per cent between 2007 and 2011.
An increase in tourism is not expected to offset this supply injection, the report says.
According to projections earlier this year by Dubai's Department of Tourism and Commerce Marketing, the number of hotels will increase from 303 to 325 in 2007, providing an additional 8,370 rooms, and seven new hotel apartments will add 1,936 rooms. Colliers points to six new four- and five-star hotels that opened between 2006 and the third quarter of 2007, adding 1,294 rooms.
Approximately 30 hotels that had a previously stated delivery date for 2007 remain under construction, the report says, anticipating a disproportionate number of additional rooms to enter the market between the third quarter of 2008 and the second quarter of 2009 with an oversupply of four- and five-star rooms in the mid-to-long term.
It is a similar story for retail with the comp-letion of several new mega malls and exten-sions, including the Mall of Arabia and Dubai Mall, set to impact heavily on existing malls. In Doha, too, the market will be tipped into oversupply, with 4,353 rooms in the four- and five-star categories expanding to 17,000 by 2012. On the retail side the amount of space now under construction will result in a big increase from 450,000 to 1.13 million sqm between 2007 and 2012.
In Riyadh, the capital of the region’s biggest economy, data is harder to come by, but Colliers estimates upcoming supply will hit short-term hotel performance without offering numbers.
Jordan's capital city, Amman, where hotel occupancy rates have been high despite terrorism attacks in 2005, has two hotels are currently under construction. In the retail sector rents remain too low to attract major mall developments of international standard, although the forthcoming Baraka Mall aims to fill this gap.
In Damascus, hotel sector demand is expected to outstrip supply for the next five years – it was only last year that the Four Seasons became the first new five-star hotel in 30 years. Retail is very important to the Syrian economy, employing 27 per cent of the labour force and comprising 17 per cent of GDP. Shopping malls of modest size are popular with nationals and cross border shoppers and two smaller malls opened this summer.