Dubai hotel room rate increases 9.2% to $191.24

Hotels in Dubai saw a boost in profits while Abu Dhabi continued to see rates and profits fall in June, according to the latest HotStats survey of full-service hotels in six Mena cities by TRI Hospitality Consulting.

Dubai hotels continued their strong performance for 2012 in June with a 9.2 per cent increase in Average Room Rate (ARR) to $191.24, causing a 10.3 per cent increase in RevPAR to $147.55.

Occupancy levels remained stable with a 0.7 per centage point increase over the same period last year. The highlight of the performance of Dubai hotels was a 50.4 per cent increase in GOPPAR to US$86.26, driven by an 8.3 per cent increase in Total Revenue per Available Room (TRevPAR) and a 1.0 per cent reduction in payroll expenses.

“Dubai was back in action again this June as a favourite summer holiday destination for domestic and regional travellers. A further boost in demand was provided by the Dubai Summer Surprises, an annual shopping and entertainment festival, which is a major attraction for families. Our HotStats data for Dubai hotels in June highlights the strength of the overall market, particularly the hotels’ ability to command a substantial increase in ARR on the back of strong demand. Hoteliers have identified that the market can support an increase in rates, especially when offered with various value added products and services. We believe Dubai performance levels will remain strong until early part of 2013 when we expect the market to witness a considerable addition to supply,” said Peter Goddard, managing director of TRI Hospitality Consulting in Dubai.

Average Room Rate (ARR) in Abu Dhabi fell 8.5 per cent to $115.68 in June resulting in a reduction in Gross Operating Profit per Available Room (GOPPAR) by 12.6 per cent to US$53.76.

The reduction in ARR is a direct consequence of the increased competition in the capital and when coupled with an increase in payroll by 2.7 percentage points, resulting a sizable impact on overall hotel profitability. The modest increase in occupancy levels was the only positive indicator during June and is attributed to the increase in tourists visiting the city. 

“Abu Dhabi hotels are yet to show any indication of a stabilisation in ARR’s this year, although occupancy levels have started to plateau. The 13 per cent increased room supply has been absorbed by the 14 per cent increase in tourists nights reported by the Abu Dhabi Tourism Authority (ADTA) in the first five months of 2012, however new entrants continue to undercut rates in order to penetrate the market. As the market is expecting more than 20 new hotels over the next three years, the continuing rate war is likely to cause further damage to hotel owners unless some kind of consensus emerge amongst the hoteliers to maintain rates,” said Peter Goddard, managing director of TRI Hospitality Consulting in Dubai.

Hotels in Jeddah experienced a 15.0 per cent growth in RevPAR driving a 13.8 per cent growth in profits during the month of June, according to the HotStats survey.

Average occupancy at four and five star chain hotels in the city reached 85.4 per cent, up by 5.8 per centage points, with Average Room Rates (ARR) increasing 7.2 per cent to US$226.63 during the month, compared to the same period last year. Revenue Per Available Room (RevPAR) for the month surged 15.0 per cent to US$193.62 leading to strong growth in profits in terms of Gross Operating Profit Per Available Room (GOPPAR) by 13.8 per cent to $147.95.

“Jeddah achieved the highest occupancy and profitability in the region in June as hotels capitalise on the strong summer demand. Jeddah is a summer holiday destination for domestic travellers as well as the summer seat of the Saudi government. The GOPPAR level of US$147.95 achieved by hotels in June is the highest in the city in the past three years. Jeddah is well positioned to perform well throughout the remainder of the year and into early 2013 as the domestic demand is continued to be strong until the Levant is safe to travel. In addition, Jeddah hotels will also benefit from the limited future supply anticipated to enter the market in the short term,” said Goddard.

Riyadh hotel occupancy levels remained stable in June, contracting marginally by 0.1 per centage points compared to this time last year. However, the ARR dropped 9.6 per cent, causing a 9.8 per cent fall in RevPAR. This reduction in top line revenues coupled with an increase in payroll by 2.2 per cent resulted in GOPPAR falling 10.3 per cent to US$129.80.

“The lower performance levels of Riyadh hotels in June reflect the annual performance cycle in which performance levels and profitability reduces in the summer months. The corporate and government segments which are the backbone of demand in the capital drop significantly, resulting in hotels applying discounts on rates to attract business. This is evident with the lower ARR’s achieved in June and we expect this to continue into July and August due the Holy Month of Ramadan when business activity slows further” said Goddard.

In Egypt, Revenue per Available Room (RevPAR) in Sharm El Sheikh increased 33.9 per cent to US$24.43 in June driven by an 11.7 per cent growth in Average Room Rate (ARR) to US$43.15 and an increase of 9.4 per centage point in occupancy to 56.6 per cent compared to the same month last year. In terms of profits, GOPPAR for the month saw an impressive growth of 91.1 per cent to US$11.96.

Cairo hotels recorded a 2.3 per centage point increase in occupancy to 43.0 per cent in June however ARR fell by 8.7 per cent to $108.58. The increase in occupancy was not enough to absorb the decrease in rates with RevPAR falling 3.5 per cent to $46.64. As a direct result profitability fell 17.3 per cent to a GOPPAR of $38.34.

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