GCC hospitality market is diversifying, say local experts

“What happened in the UAE is that the government, back in 2012, pushed for an increase in three and four-star hotels. And they did it by telling developers that if they build a three-star hotel, authority fees will be very minor,” said Joe Tabet, managing director at Dubai-based JT+Partners. “The government was trying to be supportive and create incentives because at the time, no one really wanted three-star hotels – everything was about the five-star.”

Across the GCC, the hospitality market is increasingly diversifying what it has to offer tourists. Once the
regional centre for luxurious resorts, the UAE in particular has started to sing a new tune – one that caters to visitors of a different mind-set, and purse-string behaviour.

With more than 100,000 hotel rooms and serviced apartments currently available in Dubai, nearly 32 percent belong to the five-star category and more than 22,000 rooms fall under the business hotels or four-star category. Hotels rated three-stars and below were a largely underserviced category in the market, but the recent slow transition to the midmarket can be keenly observed.

“The whole image changed because the recession happened and not all end-users could really afford a five-star hotel. Everyone wants to continue to travel, but not be forced to spend too much money. Also, end-users coming to the UAE are not only coming from other GCC countries – many are coming from other regions like Europe, where they’re used to a 22m2 room,” said Tabet. “So that’s why you’re starting to see hotels like the Premier Inn Dubai near Ibn Battuta Mall. It’s linked to the metro and a mall.”

According to Tabet, the foreseen success of boutique hotels is high. With occupancy levels in Dubai often dropping very low, luxury resorts are frequently forced to provide extreme deals on their rooms – sometimes dropping to as little as 700 dirhams a night. But three-star hotel rooms will sometimes go for 250 dirhams, and the high-end hotels, like the Atlantis the Palm, just won’t be able to compete.

Architect firms across the country are now beginning to look at more and more three-star projects. Chris Browning, director at NORR Architects, confirmed his company is eyeing various three-star hotels and serviced apartments. “There is a lot of interest,” he said. “Hopefully these projects will begin to move forward.”

As Browning noted, three-star hotels will have smaller rooms and perhaps less quality service – but it isn’t a worse proposition. It’s all about the price point, he said. “It’s value for money for the target audience. If you’re prepared to pay a lot more money, then you’ll get a lot more value, but not everyone can afford a five-star experience.”

And while three-star hotels and below were already present in the country, the new focus on them is about making them an attractive and viable option for visitors. As Tabet put it – location is key. Their success hinges on their access to the metro and proximity to shopping centres. Quality design and service are also key elements. A two-star hotel in Jebel Ali won’t succeed just because it’s affordable.

“At this stage, the market is not competitive, and in my opinion, the problem with master plans is not about building the rooms but about where to build them. People shouldn’t suddenly start building boutique hotels everywhere – everything needs to be planned and discussed at the level of the country and Dubai as a city. Yes we need three-star hotels, but not 10,000 of them,” said Tabet.

“You can call it rebranding,” he added. “But in any place in the world, from Paris to Barcelona, you have the choice of a five-star or a three-star or whatever. You attract different clientele. In the days of the big boom here, there was no oversupply so it wasn’t concerning, but during the crisis, oversupply was an issue and they realised that they needed to attract different people who don’t care about being in a five-star. So they realised they need flexibility.”

Recently, La Casa also confirmed the rise of serviced apartments in the UAE. Read about it here

This entry was posted in Insight and tagged , , , , , , , . Bookmark the permalink.

Add a comment

Your email address will not be published. Required fields are marked *