Abu Dhabi hotels 'unlikely' to complete as planned

A recently-released report says it is possible the UAE capital's hotels will fail to materialise "entirely as anticipated", even as it grew at a CAGR of 16% in four years

Hard Rock Hotel is one of the properties under construction in Abu Dhabi.
Hard Rock Hotel is one of the properties under construction in Abu Dhabi.

Hotel supply in Abu Dhabi is "often delayed", and it is unlikely the Emirate's current pipeline will materialise "entirely as anticipated", a recently-released study said. 

Expected deliveries in the capital city over the next 24 months include Grand Hyatt, Four Seasons, Edition, Fairmont, Biltmore, and Hard Rock Hotel.

These deliveries will "have direct implications for the future performance of Abu Dhabi's luxury sector", Knight Frank's Winter 2016 edition of its Abu Dhabi Hospitality Report, said. 

"However, this will only be an issue if the projects are delivered on schedule," it added. 

While Abu Dhabi’s hospitality market saw subdued performance in the years leading up to 2013, the market has since reported three consecutive years of growth, . 

RevPAR, or revenue per available room, is a performance metric in the hotel industry that is calculated by dividing a hotel's total guestroom revenue by the room count and the number of days in the period being measured.

Abu Dhabi's RevPAR growth in 2015 was notably impressive, real estate consultancy Knight Frank stated, in light of tumultuous economic conditions, as well as in comparison with its GCC counterparts. 

Ali Manzoor, associate partner at Knight Frank, said: "Whilst Abu Dhabi has historically been driven by corporate and MICE [meetings, incentives, conferences, and exhibitions] visitation, leisure tourism has seen a boost over the past few years supported by the development of leisure demand generators, including Saadiyat Island, Yas Waterworld, Yas Mall, and the Du Arena.

"This trend is expected to continue as future demand generators such as the upcoming Cultural District are completed.

"As a result, the more diversified demand base should be less susceptible to external forces.’’

Declining oil prices have led to a reduction of visitors to the UAE capital, with hotel operators claiming a softening of corporate demand. 

The trend of reduced oil and government sector visitors is likely to continue into 2016, but will be "counterbalanced to some degree by increasing leisure demand", the consultancy added. 

"The luxury hotel sector in Abu Dhabi has undergone rapid transformation since 2011," Manzoor said.

"With a compound annual growth rate (CAGR) of 16% in luxury hotel rooms between 2011 and 2015, the market has seen the introduction of several luxury hotel developments, including two St. Regis properties, the Sofitel, the Ritz Carlton, the Anantara and the Rosewood, which has made the luxury sector a fiercely competitive one.

"Luxury hotels which do not have clear differentiators are finding themselves in an increasingly precarious position, and the anticipated future supply poses a further risk."  

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