UAE hotel demand will outpace supply by 2020

Hotel demand will outpace supply by 2020, according to STR client relationships director Sarah Duignan.

The data was shared at the “accommodating growth in the Middle East” sector overview presentation at the Hotelier Express Summit 2016, held on November 23 at the Grosvenor, Dubai

RevPAR levels had peaked in October 2009 at AED1,300 (US $353.9) and now current average rates are at AED 560 ($152.4) over the last 12 months.

What are the current market conditions?

The supply currently outpaces demand in the region. There are 10,202 additional rooms due to open in Dubai before the end of 2016.

“According to STR data, supply continues to increase in the Middle East/Africa region (+2.9% in Q2 2016 compared with Q2 2015). This, in combination with a -4.0% drop in demand, resulted in declines across all KPIs for the region,” Duignan said.

The data shows that this downward hotel performance trend will continue over the next few years, until demand growth resumes in the run-up to Expo 2020.

However despite the downward trend, the data also shows that the Middle East is the biggest growth market for new hotels as a percentage of existing supply.

STR’s October 2016 Pipeline Report shows 158,714 rooms in 554 projects under contract in the Middle East and 57,740 rooms in 310 projects under contract in Africa. Among key markets in the Middle East and Africa, Makkah, Saudi Arabia (24,090 rooms in 15 projects), reported the most rooms in construction. Dubai, United Arab Emirates (19,687 rooms in 67 hotels), was the only other market to report more than 10,000 rooms in construction.

“Low oil prices, currency volatility, supply increases and safety concerns (in some countries) still continue to affect the Middle East and Africa’s hotel performance,” Duignan added.

So what does the future hold?

By 2020, the demand for hotel rooms will outstrip supply, according to STR.

According to data predictions, by 2017 occupancy levels and supply to be very strong. While there will be some growth in 2018 with the focus on Expo 2020 but the biggest growth will be in 2021, according to STR’s November forecast.