RESEARCH ABU DHABI AND DUBAI HOSPITALITY Q1 2014 ABU DHABI’S HOSPITALITY SECTOR BOTTOMS OUT, WHILE DUBAI MAKES FURTHER GAINS ABU DHABI AND DUBAI HOSPITALITY DUBAI MARKET COMMENT According to Airports Council International, the number of passengers passing through Dubai International Airport (DIA) more or less doubled between 2007 and 2013. More timely data from DIA shows that, in Q1 2014, passenger traffic rose by 11.3% yearon-year to 18.4 million, with the airport overtaking London Heathrow to become the world’s busiest globally. Moreover, increasing numbers are stopping off to enjoy a break in the emirate. For example, despite the completion of several new establishments last year, Dubai hotels and hotel apartments’ occupancy rates rose for the fourth consecutive year to reach 80.5% the highest level since 2008. Strong levels of occupancy in recent years has meant that operators have been in a position to command higher rates. Between 2010 and 2013, the average daily rate (ADR) rose at an annual average rate of 5.6%. Government incentives are increasingly encouraging midscale hotel brands to expand in Dubai. In May, for example, Nakheel announced that it had signed a management agreement with Premier Inn to open a new 372-room hotel at the Ibn Battuta mall as part of a 28,000m2 expansion of the complex. RESEARCH HOTELS ATTACHED TO MALLS INSIGHT ABU DHABI MARKET COMMENT Given Dubai’s reputation as a worldclass shopping destination, it’s not surprising that a number of hotels connected to malls are in existence here. These include Kempinski and the Sheraton at the Mall of the Emirates, The Address at Dubai Marina Mall and Ibn Battuta Gate Hotel by Mövenpick. Abu Dhabi continues to gain popularity as a business and holiday destination, as well as a transit point for those on longer journeys. Data from Abu Dhabi International Airport (ADIA) shows that, after an 18.9% increase in 2012, passenger volumes rose by 12.4% to 16.5 million last year. Moreover, in Q1 2014, passenger traffic saw an annual increase of 15.1%. Average occupancy levels for these four hotels rose from 76% in 2012 to 80% in 2013. Meanwhile, following a 24.1% increase in 2012, revenue per available room (RevPAR) rose by 16.2% to AED 766 last year. It is important to note that the destination appeal of Mall of the Emirates means that average daily rates at Kempinski and Sheraton are higher compared to most other hotels attached to malls. The Royal Rose Hotel and Novotel Hotel Al Bustan – comprising more than 700 rooms in total – opened in Q1 2014. Other new establishments that are due to be delivered by the end of this year include Capital Centre Rotana, Capital Centre Arjaan by Rotana and Adagio Al Bustan. DESERT RESORTS INSIGHT Following a small fall in 2012, hotel and hotel apartments’ occupancy rose to 71% last year – the highest level since 2009. This is despite the fact that the supply of rooms has been rising at an annual average rate of 10.5% over 2009-13. However, while occupancy has broadly been increasing in recent years, rising competition between hotels and hotel apartments has driven down the ADR. In 2013, for example, Abu Dhabi’s ADR was around 52% lower compared to five years earlier. Moreover, these types of hotels are popular among GCC families and transit guests, and tend to perform relatively well during the summer. Also they typically experience longer average lengths of stay than pure city hotels, but shorter than beach resorts. Nevertheless, Abu Dhabi continues to attract rising numbers of visitors. Data from the Tourism and Culture Authority shows that, in the 12 months to March 2014, the number of room nights rose 21% year-onyear, and were up almost 84% compared to the corresponding period of 2008. Desert resorts in Abu Dhabi primarily attract Emiratis and expatriates working within the country, as well as European tourists. Being a hideaway destination, demand for such resorts tends to be driven by leisure rather than business travellers. Abu Dhabi’s desert resorts have experienced fairly stable occupancy in recent years, although RevPAR has steadily been climbing. By contrast, RevPAR across Abu Dhabi’s hotels sector as a whole declined by 9% to AED 444 over 2011-13. That suggests that desert resorts are broadly outperforming the market as a whole. FIGURE 1 FIGURE 2 FIGURE 3 FIGURE 4 FIGURE 5 FIGURE 6 Passenger traffic through Dubai International Airport Hotels and hotel apartments key performance indicators Hotels connected to malls key performance indicators Passenger traffic through Abu Dhabi International Airport Hotels and hotel apartments key performance indicators Number of room nights in Abu Dhabi, 12-month moving total 40 400 30 Source: Dubai Statistics Centre, DTCM 13 2011 2012 2013 Source: STR Global Source: Abu Dhabi International Airport Jan-14 12 Jul-13 11 Oct-13 10 Apr-13 09 0 Jan-13 08 0 0.6 Jul-12 10 Oct-12 07 0.8 Apr-12 0 1.0 20 200 10 0 900 RevPAR (LHS) 90 800 Occupancy (RHS) 80 700 70 600 60 500 50 400 40 300 30 200 20 100 10 0 0 07 08 09 Source: SCAD, TCA 10 11 7 100 ADR (LHS) % AED 50 Jan-12 Jan-14 Jul-13 Oct-13 Apr-13 Jan-13 Jul-12 Oct-12 Apr-12 Jan-12 Jul-11 Oct-11 600 1.2 Jul-11 20 100 3.0 60 40 30 1.4 Oct-11 50 400 200 3.5 70 800 60 300 4.0 Apr-11 80 Annual average growth rate (2011-13) = 15.6% Apr-11 AED 4.5 1.6 Jan-11 500 5.0 Jan-11 90 1,000 1.8 Millions 70 AED 5.5 Millions Occupancy (RHS) 80 600 Source: Dubai International Airport 100 1,000 % 6.0 90 700 Annual average growth rate (2011-13) = 14.2% RevPAR (LHS) % Occupancy (RHS) 6.5 1,200 100 RevPAR (LHS) 800 12 13 6 5 Millions ADR (LHS) ADR (LHS) 7.0 4 3 2 1 0 07 08 09 10 11 12 13 14 Source: TCA *this data reflects the performance of the Kempinski and the Sheraton at the Mall of the Emirates, The Address at Dubai Marina Mall and Ibn Battuta Gate Hotel by Mövenpick. 2 3 COMMERCIAL BRIEFING For the latest news, views and analysis of the commercial property market, visit knightfrankblog.com/commercial-briefing/ DEVELOPMENT CONSULTANCY & RESEARCH Harmen De Jong Partner: Development Consultancy & Research +971 56 1766 588 [email protected] Khawar Khan Research Manager +971 56 1108 971 [email protected] Arati Tare Consultant +971 50 6134 450 [email protected] Niamh Keane Surveyor +971 56 6166 943 [email protected] PROFESSIONAL SERVICES Stefan Burch Partner: Professional Services +973 3955 3776 +966 5 3089 3297 [email protected] RECENT MARKET-LEADING RESEARCH PUBLICATIONS Dubai Office Research Report Q1 2014 Dubai Logistics and Industrial Research H2 2013 Dubai Prime Residential Review Q1 2014 Wealth Report 2014 Knight Frank Research Reports are available at KnightFrank.com/Research © Knight Frank LLP 2014 Technical Note Occupancy: Number of rooms occupied as a proportion of the total number of rooms available to rent. ADR: This represents the average rental income per occupied room per day. It is calculated by dividing room revenue by the number of rooms sold. The ADR is based on paid rooms only and excludes complimentary and house use, but includes service charge. RevPAR: This measures revenue per available room in a hotel. It is calculated by dividing room revenue by the total number of rooms in service. Knight Frank Research provides strategic advice, consultancy services and forecasting to a wide range of clients worldwide including developers, investors, funding organisations, corporate institutions and the public sector. All our clients recognise the need for expert independent advice customised to their specific needs. This report is published for general information only and not to be relied upon in any way. Although high standards have been used in the preparation of the information, analysis, views and projections presented in this report, no responsibility or liability whatsoever can be accepted by Knight Frank LLP for any loss or damage resultant from any use of, reliance on or reference to the contents of this document. As a general report, this material does not necessarily represent the view of Knight Frank LLP in relation to particular properties or projects. Reproduction of this report in whole or in part is not allowed without prior written approval of Knight Frank LLP to the form and content within which it appears. Knight Frank UAE Limited - Abu Dhabi, is a foreign branch, with registration number 1189910. Our registerd office is Plot C210, East 4/2, Al Muroor Street, Abu Dhabi, UAE, P.O. Box 3520.
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