Profitability of Dubai hotels under pressure as room rates slide

Hotels in Dubai saw profit per room fall by 22 per cent in the first four months of this year, due to a significant drop in average room rates (ARR), according to the latest report from research firm HotStats.

While occupancy for the January to April 2016 period reached around 87 per cent, ARR fell by 9.6 per cent to $298.68. This resulted in revenue per available room (RevPAR) for Dubai hotels to drop by 10.5 per cent in the same period to $258.04.

Conference and banqueting revenue per available room, meanwhile, rose 17.2 per cent year-on-year to $20.39 from $17.40 in 2015.

Regional snapshot

Elsewhere in the region, Sharm Al Shaikh hotels saw profit per room at just $0.50 in April, a decline of 97.9 per cent over the same period in 2015, with year-to date gross operating profit per available room [GOPPAR] recorded at -$2.85, a 116.7 per cent decline compared to the previous year.

Despite hotels in Sharm Al Shaikh recording a 26.8 per cent increase in RevPAR in the 12 months to September 2015 to $34.82 compared to the 12 months to September 2014, “as the city recovered from the Arab Spring in 2011, the downing of Russian tourist plane Metrojet 9268 by terrorists in October 2015 quickly halted this upward trajectory,” HotStats said in the report.

“Since that time, Sharm Al Shaikh has witnessed a significant decline in visitor numbers and the risk of travelling to the area remains high, according to the UK Foreign Office,” it added.

Meanwhile, Beirut hotels recorded a 30.30 per cent profit drop in April, after a 38.7 per cent decline in March, suggesting that the market is on the decline.

Despite the terrorist attacks in November 2015, growth in the market was maintained until early 2016, with ARR increasing by 16.5 per cent year-on-year to $106.76 in the 12 months to February 2016.

However, the market has since suffered a year-on-year rate decline in both March and April, by 6.5 per cent and 10.5 per cent, respectively.

RevPAR dropped 6.8 per cent year-to-date to $79.10 from $84.86, mainly due to the decline in ARR, as occupancy in Beirut broadly remained stable.

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