Increasing tourist numbers have lifted investor confidence in the country’s hotel sector, particularly Dubai, say the property consultants JLL.
While domestic developers and high net worth individuals form a large portion of investors, there is also an increased appetite from global institutions and conglomerates, it said.
“Demand from visitors is rising in the UAE and in Dubai in particular, leading to the investor confidence. But there is also a consciousness of the possibility of oversupply,” said Ahmed Ramdan, the group chief executive of Dubai-based hospitality consultancy Ròya International.
“Banks are still conservative in their approach as they see this as a real estate rather than a tourism sector and this is a challenge.”
Dubai has 410 hotels accounting for 60,166 rooms, or 64 per cent of the UAE inventory.
JLL says of the 28,000 new rooms to come onstream by 2016, Dubai will account for about 50 per cent followed by 31 per cent in Abu Dhabi.
In the capital, the supply of hotel rooms had grown faster than demand in the past, but the emirate is ramping up its tourism sector with diverse offerings such as those on Yas Island, which is expected to stabilise the market, JLL analysts said. The emirate has 20,242 rooms from 94 properties.
Driven by the expansion of Emirates Airline and Etihad Airways, visitor numbers have also been increasing. Last year, Dubai attracted 11 million travellers, while in Abu Dhabi 2.8 million people checked into hotels.
The two airlines between them introduced 31 new routes in the past two years. This year, Emirates has announced flights to Abuja, Brussels, Chicago, Kano in Nigeria, and Oslo. Etihad has announced eight new routes including Perth, Jaipur, Dallas and a service to Los Angeles that began yesterday.
Investment related to travel and tourism in the UAE touched Dh21 billion last year, or 6.2 per cent of the overall investments, according to the Geneva-based World Travel and Tourism Council. The figure is expected to rise by 9.7 per cent this year, and by 5.1 per cent annually over the next 10 years to Dh37.8bn in 2024.
The UAE’s hotel sector is one of the top categories to receive foreign direct investment (FDI) apart from oil and gas, power and water, construction and IT.
The UK, central Europe, Saudi Arabia and Kuwait account for most of the FDI inflows into this sector in the UAE, Mr Ramdan said.
“They are quite familiar with the market and have been investing in different sectors [already],” he said.
With the inflows and increasing investor confidence, a number of stalled hotel and hospitality projects have been revived. That includes Nakheel’s Deira Islands. In March, the developer released 94 hotel plots for sale that will add 23,000 rooms.
Within Ròya’s portfolio, revived projects account for 15 per cent of its 60 projects, and at least 10 per cent of these involve FDI.
The Dubai government initiative to encourage the building of more mid-range hotels will increase the number of investors in the sector, Mr Ramdan said.
“The last two years [investment] has grown tremendously, and now you will see it will grow but it will stabilise because supply is coming into the market,” he said.
More developers are announcing hotel projects. Dubai-based Union Properties last week announced that it would build 1,000 hotel rooms in the next five years in the mid and budget range.
Meraas Holding is developing the Bluewaters project off Jumeirah Beach Residence that will have a five-star hotel besides a 210-metre Ferris wheel.
Mohammed bin Rashid City, Dubai Canal, a theme park complex in Jebel Ali and a design district in Downtown Dubai besides Saadiyat Island in Abu Dhabi are expected to drive tourism in the run-up to Expo2020.
Follow us on Twitter @Ind_Insights
Read more: http://www.thenational.ae/business/industry-insights/tourism/investor-confidence-in-uae-hotels-grows-as-visitor-numbers-rise#ixzz33T3141jq
Follow us: @TheNationalUAE on Twitter | thenational.ae on Facebook