Dubai Hotel Chiefs Dismiss Over Supply Fears Post Expo 2020

Although over supply fears are uncalled for, average Dubai room rates need to decrease, industry experts say.



Dubai’s hospitality sector will not see an oversupply of rooms after Expo 2020, senior hotel executives have told Gulf Business.

“I don’t believe there will be an over supply of hotel rooms post Expo 2020,” said Pascal Gauvin, IHG COO for Middle East, India and Africa.

“We can have over supply or under supply which is not good either. We were under supplied in Dubai for a very long time and then we had to refuse people.

“We could have a bit of over supply sometimes but there can be some fluctuations. I believe that Dubai is here for the long term. 2020 is only going to be an accelerator. There is an ambition and vision in Dubai,” he said.

With Dubai’s vision to attract 20 million visitors by 2020, the emirate has been seeing unbridled expansion and investments across the hospitality sector.

Over 11 million guests stayed at Dubai’s hotels last year, up 10.6 per cent, compared to 9.9 million in 2012, according to the latest figures from the Department of Tourism and Commerce Marketing (DTCM).

On the supply side, the number of hotel rooms and apartments at the end of 2013 amounted to 84,534 (611 establishments) compared to 80,414 (599 establishments) in 2012, an increase of over five per cent.

In the current development pipeline for 2014 to 2016, an additional 141 hotel establishments including 99 hotels are expected to be added to the market, bringing the total to 751 hotel establishments and just under 114,000 rooms.

In an exclusive interview with Gulf Business earlier this month, director general of DTCM Helal Al Marri said that Dubai is not building any hotels specifically for Expo 2020.

“With regards to the Expo, we will not be building hotels specifically for the event, because that’s not the strategy for Dubai’s tourism,” he said.

Alex Kyriakidis, president and managing director, Middle East and Africa for Marriott International, said it envisages another 5,000 rooms in the UAE but only around 20 per cent are likely to be Expo related.

Although over supply fears have been quelled, industry experts say that Dubai still needs to bring down average room rates.

“Average rates in the market need to come down. They are not going to come down because five star hotels reduce their rates but because there are more four and three star hotels that are going to be built in the country,” said David Thompson, CEO of JA Resorts and Hotels.

“When we constantly get compared to other cities, we see our average rates are quite high. Cities such as London and Paris have a very healthy mix of star ratings but here people generally invest in five star hotels and that is reason why the average rates are artificially high.

“When we start having three and four star hotels into the mix, suddenly Dubai does not look bad,” he said.

Dubai’s hospitality sector is increasingly looking to tap into the affordable market.

“Three and four star hotels are going to come. If you want mass tourism you need to be able to cater to them and their requirements. If you look at the new DTCM regulations, it starts with the new options such as villa letting,” said Thompson.

“They cover all categories, it is not about luxury but affordable luxury and value for money.”