The UAE’s hospitality sector is growing at a remarkable pace compared to other GCC countries with a record 54,438 rooms under construction in the run-up to Expo 2020.
The latest STR hotel pipeline data shows that the UAE leads in the Middle East and Africa region with the most number of new hotels and rooms under construction.
The new rooms represent 31.8 percent of the UAE hospitality sector’s existing room inventory.
By 2022, it is estimated that the UAE’s hospitality market is expected to reach $7.6 billion, growing at a five-year CAGR of 8.5 percent between 2017 and 2022.
In particular, hotel room supply in Dubai, the fourth most visited city in the world, is expected to reach 132,000 in 2019, with the emirate aiming to complete 160,000 hotel rooms by October 2020 – in time to welcome 25 million visitors for Expo 2020.
With 20 million annual visitors expected to visit Dubai next year, plus an additional five million between October 2020 and April 2021 – 70 percent of which will come from outside the UAE – the overall hospitality supply in the emirate is expected to increase exponentially.
In the Middle East and Africa region, four other countries showed more than 4,000 rooms under construction. They include Saudi Arabia with 41,207 rooms, accounting for 40.5 percent of existing inventory.
While Qatar has 14,518 rooms under construction, accounting for 53.5 percent of the existing supply, Oman has 4,589 rooms (24.1 percent), and Egypt has 4,100 rooms (2.4 percent) in the pipeline.
The July 2019 hotel pipeline data from STR showed a total of 427 projects accounting for 123,742 rooms in construction in the Middle East and 138 projects and 25,986 rooms in construction in Africa.
The Middle East total represented a 2.1 percent year-over-year increase in the number of rooms in the final phase of the development pipeline. The region reported an additional 30,240 rooms in the final planning stage and 45,948 rooms in planning.
The Africa room construction total was down 1.8 percent year over year. Africa also showed 17,485 rooms in the final planning and 23,954 rooms in planning.
The STR data on upcoming hotel rooms come at a time when hotels in the Middle East and North Africa recorded a 6.4 percent year-on-year decline in profit per room in June. According to the latest data tracking hotels from HotStat, this was because as hotels in the region missed their usual demand bump as the month of Ramadan mostly fell in May.
Despite a 10.2-percentage-point increase in room occupancy in the month to 65.0 percent, it was at the expense of achieved average room rate, which plummeted by 18 percent year on year to $149.12.
Further to the year-to-date peak recorded in May at $183.65, achieved average room rate fell back by almost $35 this month.
This was led by significant rate declines across all key segments, including Corporate (down 8.8 percent), Individual Leisure (down 20.2 percent) and Group Leisure (down 32.8 percent).
The 2.7 percent decline in RevPAR was tempered by an increase in ancillary revenues, which included a 0.2 percent uplift in food and beverage revenue and a 17.8 percent jump in leisure revenue.
“As a result, TRevPAR at hotels in Mena fell by 1.4 percent in June to $171.34. And despite their best efforts to manage costs, illustrated by the 0.1 percent saving in payroll to $56.83 per available room, profit levels at Mena hotels fell to $47.25 in the month. This was the lowest profit per room recorded in 2019 and 57.1 percent below the year-to-date,” HotStat report said.