Dubai hotel rates to pick up by end-2011

Dubai hotel sector will see resilience by end 2011 when room rates are expected to improve after remaining flat this year, said a leading global hospitality industry consultancy firm.

Global leisure travel may take longer to improve and therefore leisure sector rates may remain depressed. With a large proportion of demand for Dubai hotel rooms being generated from the leisure sector, rate improvement may take longer toward the end of 2011 and beginning of 2012, said Julian Kemp, associate director, CBRE Hotels EMEA in a statement.

Apart from Dubai hotels’ exposure to the tourism sector, an oversupply of luxury accommodation will further delay recovery of room rates that witnessed a steep decline in 2009.  Following a slump in demand for rooms from the global leisure sector, Dubai’s once vibrant hospitality sector witnessed a 10.2 per cent drop in  hotel occupancy levels in 2009.

Kemp said globally hotel room rates would remain deflated in 2010 but a recovery in Dubai might take longer because the emirate was dependent on leisure markets improving. The general consensus among the industry is that “trading will be tough.”

“The UK is one of the prime sources of demand for Dubai and with a high degree of uncertainty in respect of the economy for this year, travel for both leisure and business is likely to remain depressed,” he said.

The immediate impact of this to Dubai hotels will be a loss in occupancy level, leading to a drop in room rates. “As a result, in our opinion the average room rate (ARR) is likely to decrease further or at best remain in line with results achieved in 2009.”