UAE’s hotel pipeline hits $32bn as tourism recovery continues

Accor.com

• Operators plan to add 48,000 rooms by 2030, says Knight Frank
• Guest numbers rose 42% to 12 million in first half of 2022
• Some industry figures asking whether luxury market is oversupplied
• Three-quarters of the new hotel rooms will be built in Dubai

The UAE’s hotel development pipeline has risen to $32 billion, analysts said on Tuesday, as visitor numbers continue to grow.

Property consultancy Knight Frank said another 48,000 rooms were planned for the Emirates by 2030 and their delivery would cost more than $30 billion.

UAE tourism revenues reached $5.2 billion in the first half of 2022, the government announced earlier this month. The number of hotel guests rose 42 percent year-on-year to 12 million in the six months.

“A strong tourism recovery” is expected in the upcoming winter season, said Sheikh Mohammed bin Rashid Al Maktoum, the UAE’s vice president and ruler of Dubai.

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Knight Frank’s research comes as Simon Leigh, managing director of Premier Inn MENA, told AGBI that Dubai was probably already oversupplied with luxury hotels but there was scope for growth in the mid-market. 

“I’d say there’s enough supply. Is it oversupplied? Possibly. But not oversupplied within our segment. If you look at the general position in terms of room stock in the market, you’ve predominantly got five and four stars, which are about 75 percent of the total inventory,” Leigh said.

“We need to be very thoughtful, if we’re going to put more hotels in, whether we build and operate or take more under a management agreement. Would I choose to build, which is a slower and more expensive process? Probably not. I’d probably build in other countries.”

According to Alpen Capital, the UAE remained the most sought-after destination in the Middle East in 2021, with travel and tourism spending revenues of $27.4 billion. Saudi Arabia was second with $22.2 billion.

Together, the UAE and Saudi Arabia accounted for more than 64 percent of the total travel and tourism spend in the region last year.

International hotel firms keep on building

Knight Frank’s research found that the proportion of international hotel operators to local ones is set to rise to 60 percent by 2030, from 56 percent today.

Hilton is forecast to add the most rooms overall, with close to 5,000 new keys expected by the end of the decade – a 43 percent increase on its current stock. 

This mirrors the group’s plans in Saudi Arabia, where Hilton will emerge as the second biggest operator by 2030 with 19,000 rooms under management.

Knight Frank estimates that by 2030 the Accor Group will cement its place as UAE’s largest hotel room operator, with close to 25,000 rooms under management. It is also the biggest operator in Saudi Arabia.  

Faisal Durrani, partner and head of Middle East research at Knight Frank, said: “The UAE’s world-leading hospitality market is set to expand by 25 percent by 2030, with a further 48,000 rooms adding to the nation’s extensive 200,000 key portfolio.

“Perhaps unsurprisingly, Dubai is set to account for the lion’s share of this total, with 76 percent of all new rooms coming to the emirate, which already boasts over 130,000 rooms. This stockpile of hotel rooms is already higher than cities like London or New York.”

Turab Saleem, partner and head of tourism and hospitality at Knight Frank, said: “The UAE’s vibrant hospitality market continues to expand, with a clear focus on the luxury end of the price spectrum. Our analysis shows that 70 percent of all the rooms planned will fall in the four and five-star category.

“This comes at a time when Saudi Arabia is pushing ahead with what is set to be one of the world’s most ambitious hospitality development programmes that will see more than 275,000 hotel rooms built across the kingdom over the course of the 2020s at a total cost of $110 billion.”

According to Knight Frank, the UAE’s three biggest cities – Dubai, Abu Dhabi and Sharjah – continue to lead the region in terms of hotel performance, but Saudi Arabia’s cities are poised to experience a huge rise in demand as Vision 2030 unfolds and business as well as leisure travel begins to overwhelm the existing supply. This will lead to higher room rates, the consultancy added.

Ghazi D Mousharafieh, chief financial officer of Rotana Hotel Management Corporation, said the UAE-based company planned to add nearly 11,000 keys across the region.

“There is no doubt the pandemic highly impacted our industry but as world economies continue to recover, the industry is recovering simultaneously and adapting to changing consumer behaviour,” he added.