Abu Dhabi: Average room rates at hotels in both Abu Dhabi and Dubai hotels fell nearly 10 per cent in 2016 to reach Dh467 and Dh711 respectively amid slower demand on the back of lower consumer spending and lower economic growth.
According to the latest report by STR, a US-based data provider, occupancy rates in Abu Dhabi dropped 3.6 per cent in 2016 to reach around 72 per cent, while Dubai reported a slight increase in occupancy (up 0.5 per cent to 77 per cent).
In the overall UAE market, hotel supply grew 4.8 per cent while demand rose 5 per cent, marking the first time since 2013 that demand growth outpaced supply growth.
Hotels in both Abu Dhabi and Dubai have been facing challenges over the past two years, especially as the US dollar (to which the UAE dirham is pegged) strengthened, making both destinations pricier to visitors from key markets like Europe, the UK and Russia.
Elsewhere in the Middle East, occupancy rates at Egypt’s hotels continued to drop amid ongoing security concerns, with rates falling 36 per cent below pre-Arab Spring levels, according to the STR report.
The devaluation of the Egyptian pound resulted in a sharp increase in average room rates when reported in local currency, but in US dollars, year-end room rate growth was 2.5 per cent.
Egypt also recorded very little supply growth since 2012, while demand has been volatile, falling nearly 14 per cent in 2016, STR said.
In Saudi Arabia, the report said the plunge in oil prices heavily affected the kingdom’s economy and hotel industry. Riyadh, for example, was heavily affected in 2016, with occupancy down 10 per cent and average room rates down 8 per cent.
“According to STR analysts, oil in not the only factor affecting the country’s hotels, however, as sharp supply growth has pressured occupancy levels and overall performance.
In December, Saudi Arabia’s luxury segment experienced an 18.6 per cent increase in supply compared with the same month the previous year, contributing to a 23.3 per cent year-over-year [revenue per available room] decline for the country’s luxury hotels during the month,” the report said.
