Dubai owners turn to classifieds to offload hotels

Dubai hotel owners are increasingly turning to listings websites to source potential buyers for their properties as they struggle to offload assets in the city’s glutted hospitality market.

At least five budget and midmarket hotels are for sale on the city’s classified websites, with prices ranging from $19m for a three-star Deira hotel to $35m for a Tecom-based property.

Industry analysts said owners are broadening their advertising in an attempt to attract investors as the city’s increasing number of hotels puts downward pressure on profit margins

“It is typically very hush, hush. There are only a small number of investors able and willing to invest in hotels,” said Matthew Armstrong, property advertising manager at local portal Dubizzle. The site has seen a rise in properties being sold to “end users and international institutional investors alike,” he said.

Older hotels in Dubai’s traditional districts of Bur Dubai and Deira could be struggling to attract guest traffic as newer, centrally-placed properties win the fight for tourists, said Charles Neil, CEO of real estate consultancy Landmark Properties.

“The hotels are old, costs may be mounting, and due to the amount of new availability, revenues could be dropping, therefore it could be a simple case of ‘get out now’,” he said.

“The embargo on Iran may also be taking its toll on business travellers from Iran who would typically use hotels in Deira and Bur Dubai. In Barsha there are also huge numbers of hotel apartments that offer very cheap rates, so that may be putting a strain on hotel operators.”

Dubai’s total hotel supply stood at approximately 53,600 rooms in December, according to property broker Jones Lang LaSalle, to include 2,500 branded rooms that came online in 2011.

The city is expected to absorb a further 5,800 guest rooms in the first quarter of 2011, JLL said, further squeezing average room rates. Growth was flat in the last quarter of 2011.

Projects due for completion this year include Al Khor Rayhaan (Al Ghurair City), Doubletree By Hilton Al Barsha, Fairmont The Palm, Jumeirah Creekside Hotel and Movenpick Jumeirah Lake Towers.

According to consultancy STR Global, Dubai has more than 13,300 hotel rooms in its construction pipeline going forward, compared to 5,298 rooms in neighbouring Abu Dhabi.

The city could see a further wave of hotels being offered for sale as owners choose to exit the market rather than compete with newer, branded properties said David Le Bail from real estate consultancy DTZ.

“It is a development cycle and an investment strategy. After a few years, once the asset has reached its optimum profit-making levels, you sell it to optimize your return and then you develop another asset with the cash generated,” he said.