High land costs curtail mid-market hotel construction
The areas in which mid-market hotels would attract investors typically have "prohibitively" high land costs, a senior official from Swiss-Belhotel's said
One of the Middle East’s top hoteliers has called on authorities to regulate land prices so as to spur the development of mid-market hotels in Dubai, with the sector facing high construction costs as one of its key challenges.
Speaking at the Great GM Debate 2018 hosted by Construction Week’s sister title, Hotelier Middle East, Laurent A Voivenel, senior vice president for operations and development at Swiss-Belhotel International Middle East, Africa, and India, said the construction cost per key of mid-market hotels is 20-30% lower than that of five-stars, adding that mid-market facilities “require less investment and take less time to build”.
He continued: “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.
“Moreover, the lower costs of construction, operations, and staffing for mid-market hotels contribute to greater profitability of projects and faster returns on investment.”
Voivenel said numerous factors make mid-market hotel development “a lucrative investment option”.
“The most important is that despite the strong demand, only a limited number of budget hotels is entering the market, making the supply and demand dynamics far more favourable for mid-market hotels,” he added.
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