Dubai needs to bridge the gap between luxury and mid-market hotel sector

"Dubai's luxury to mid-scale hotels ratio is above 50% currently but in developed cities like Paris the ratio is somewhere between 20-30%," according to Elie Milky, vice president business development Middle East, North Africa and Turkey, Radisson Hotel Group.

Speaking during a panel discussion on "balancing supply and bridging the gap in the market" at the annual Hotelier Middle East Great GM Debate held in Dubai, Milky said one of the reasons owners aren't convinced by mid-market hotels is the price of land. 

Agreeing with him Laurent A. Voivenel, senior vice president, operations and development – Middle East, Africa & India, Swiss-Belhotel International said: “there needs to be some sort of intervention from the authorities regarding land allocation because in areas where mid-market hotels should be to attract investors, the cost of land is prohibitively high or not available for budget hotels."

Voivenel added that, "There are many factors that make mid-market hotels a lucrative investment option. The most important is that despite the strong demand only limited budget hotels inventory is entering the market, making the supply and demand dynamics far more favourable for mid-market hotels."

He added that the cost of construction per key for mid-market hotels too is 20-30% lower than five-star hotels while such hotels "require less investment and take less time to build".

According to Voivenel, the most important thing to note is that despite the strong demand, only limited budget hotels inventory is currently entering the market.

"Moreover, lower cost of construction, operations and staffing for mid-market hotels contribute to greater profitability of projects and faster ROI,” he said. 

Wyndham Hotels & Resorts has grown its room portfolio in the mid-scale sector by over 25% across the MEA region over the past two years, revealed Ignace Bauwens regional vice president, Middle East, Eurasia & Africa, Wyndham Hotels & Resorts.

Adding to that Bauwens said, "If you look at the travel pattern today, millennials are travelling more for a shorter time and are looking for more connectivity. It's not only about WiFi, it's about booking patterns as well. Look at how mobile bookings have risen. Dubai as a destination needs to have more diversity as 2020 approaches."