High liquidity, insufficient capacity and a return to fundamentals are helping to drive hotel investment in Abu Dhabi.
The majority of speculators who had given the market liquidity and demanded quick, high returns for investing in an industry they did not really understand have all but left, said vice president of hotels advisory for CBRE, a consultancy firm providing services for the sale, valuation and financing of hotels, Amine Hamdani.
The high returns and easy lending conditions of recent years have also disappeared creating opportunity for those who understand the market and are willing to make long-term investments, according to Hamdani.
They will not reap the high returns of two years ago, but the promise of profit still exists for those with the right priorities, he said.
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And because a slower market will benefit the investors that know the industry, it will be those investors who will drive quality and competition.
“The number of investors who really understand the market is higher now,” Hamdani told Hotelier Middle East. “The market is more mature; healthier. We have more long-term investors, and this is the way it should be.”
Hotels that had previously turned a profit by simply taking advantage of high demand would now have to change strategy, he added.
Though there is still demand for quality hotels, increased competition means that investors would “have to do their homework” and push the standards of service they had traditionally offered.
Many investors are now looking to streamline their operations and maximise revenue in each property, Hamdani continued.
“We are helping a few clients reposition their properties. They can’t develop externally – so how can they develop internally instead,” he explained.
“They will create new F&B, they will see where there are opportunities within the hotel to maximise space, where they can generate more revenue, reduce costs for each property, and differentiate themselves. Now, they have to be better than the others.”
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Hotel operators, service standards, recruitment and retention strategies would be under much more scrutiny than before, Hamdani continued.
“There are a lot of hotels coming, so now investors will look for location, the right operator, and finally innovation, innovation, innovation,” he said.
He believed that Abu Dhabi’s ‘easy does it’ strategy of focusing on the development of sustainable properties that suit the size and future growth of the market was now paying dividends.
“It’s on a smaller scale and integrates very well with the concept of culture that Abu Dhabi is introducing,” he said.
The emirate’s approach of developing its cultural and sporting institutions, from the Louvre and the Guggenheim museums, through to the opera and formula one racing tours, were placing it on a unique, more sustainable footing.
Being the capital of the UAE, Abu Dhabi’s hotels were also able to take advantage of the business generated from embassies and other governmental institutions.
“Dubai is different in that it has a more business, city-oriented style,” said Hamdani. “There are no 1539-room Atlantis type hotels in Abu Dhabi.”
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