UAE hotels absorb rising costs at expense of profit

May 5, 2025, 7:52 AM

UAE hotel revenue grew by a modest 3 percent to AED45 billion in 2024, suggesting hoteliers are absorbing increasing operational costs — UAE hotel revenue grew by a modest 3% to AED45 billion in 2024, suggesting hoteliers are absorbing increasing operational costs

UAE hoteliers not raising prices
Revenue per room has slowed
Increase in Dubai visitors to 18.7m

Many UAE hoteliers are reluctant to raise prices to compensate for rising operational costs, even as intensifying global competition and geopolitical volatility tighten profit margins.

According to data from CBRE Middle East, growth in UAE hotel revenue per available room (RevPAR) has slowed over the last two years, from 6 percent in 2023 to 3 percent last year, to AED405 ($110).

Dubai had more than 18.7 million international overnight visitors last year, a 9 percent increase over the year before.

Neighbouring Abu Dhabi recorded an ever bigger jump in hotel guests of 26 percent, though from a lower base, to almost 5 million, and over a shorter time frame of January through October.

Across the whole year, however, UAE hotel revenue grew by a more modest 3 percent to AED45 billion, suggesting that operators may be absorbing much of the additional cost to stay in the market.

Dimitris Manikis, president of Europe, Middle East, Eurasia and Africa at Wyndham Hotels & Resorts, said rising input- and supply-chain costs will be shared across the company’s 9,250 properties in almost 100 countries rather than be passed on to customers.

Dimitris Manikis of Wyndham Hotels, says costs will be shared across all properties in almost 100 countries

“They [the costs] will hurt us, to some extent,” Manikis said in an interview this week with AGBI. “But, overall, I think we will absorb it and the industry will still go marching on.

“It’s like a poker game; you have to deal with the cards you’ve been served. What is the alternative? We’re not going to close up; we’re going to keep on growing.”

A recent S&P Global UAE Purchasing Managers’ Index, which surveys about 1,000 executives in the Gulf state’s non-oil private sector, found that average costs had risen at “a moderate pace at the end of the quarter”.

Respondents said there has been a rise in material costs due to stronger demand. “Salary costs continued to climb due to cost-of-living pressures,” S&P Global said in the report.

In the emirate of Ras Al Khaimah, Sherif Kasseb, general manager of Rixos Al Mairid, said exchange rate volatility – particularly in the Russian rouble, a key source market – has added complexity to budget forecasts but that the hotel has “no intentions” of raising prices in the short term.

Philip Barnes, CEO of Rotana Hotels, echoed the caution.

While occupancy across the UAE is at around 80 percent, inflationary pressures have yet to reach a tipping point, he said.

“There’s an inflationary increase, but nothing of any huge significance as of yet,” he said. “But like any other industry, if the product gets to be too expensive over here, you move to find an alternative source.”

That search for alternative supply chains is growing, especially as the US reorders the global trading framework with the highest US taxes on imports in more than a century.

Gulf Cooperation Council countries import roughly 85 percent of their food, according to the World Economic Forum, making the region highly susceptible to global supply disruptions.

Elsa Lahoude, general manager at ME by Melia Dubai, said her hotel now works exclusively with local farms and suppliers to mitigate risk and control costs. “We’re very, very localised,” she said. “It’s the best way to ensure consistency and price stability.”