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Sunday, July 21, 2024

Location, location, location: The world’s top hotel destination

by Joanna Andrews

© Nicky Andrews
© Nicky Andrews

Dubai is on a roll. Not only has the city defeated developed nations to host the World EXPO 2020, it also recently triumphed over London’s Heathrow to be home to the world’s busiest airport as it increases it global appeal as a tourism hotspot. The number of visitors to the city is climbing all the time. Occupancy at hotels in Dubai averaged 80 per cent in 2013. And this year, things are even better as the city woos guests with a plethora of events. So, how does Dubai stack up against the rest of the world? Joanna Andrews takes a look.

Dubai International Airport overtook London Heathrow as the world’s busiest airport for international traffic in the first quarter of 2014. A total of 18.3 million passengers passed through Dubai International in the January to March period compared to 16 million passengers in Heathrow. That’s an 11.4 per cent increase from the same period last year. This year things are expected to be even better according to the head of the Dubai Civil Aviation Authority, and that’s despite an 80-day closure of some of the airports runways. “I don’t think that we will see less than 70 million plus this year for Dubai International Airport … I think the growth will be there,” said HH Sheikh Ahmed bin Saeed Al Maktoum, who is also the Chairman of Emirates Airline.

Some 66.43 million passengers passed through Dubai International airport in 2013, up 15.2 per cent from 2012. Dubai recently opened a second airport, Dubai World Central (DWC), to accommodate growing demand. DWC is expected to eventually become the city’s main airport early in the next decade. The airport, which opened in October 2013, will have five runways, and the passenger terminal will initially be able to handle seven million passengers a year.

And of course, things are going to heat up significantly following Dubai’s win to host the Expo 2020, a six-month fair, which is expected to draw in 25 million visitors. Of the 25 million visitors expected to arrive between October 2020 and April 2021, some 17.5 million will come from abroad.

No surprise then that the city’s hotels are busting at the seams. Most major hotel brands already have a presence in Dubai. And the arrival of new 4-star and 5-star projects are expected to increase competition in the upscale and upper-upscale segments.

Occupancy Rates

According to STR Global, which benchmarks hotel data for over 6.4 million rooms worldwide, hotels in Dubai achieved their highest February occupancy rate since 2007. Separate data from HotStats - which provides data to hoteliers in the UK, Europe and Middle East - shows that hotels in Dubai maintained their robust performance in February due to a high number of international visitors that propelled occupancy rates of four and five star hotels to 87.6 per cent. HotStats says “the strong demand allowed hoteliers to increase yields with the market witnessing an 8.7 per cent surge in Average Room Rates (ARR) to US $366.99.”

So how does that compare to the rate of a room in other major cities in the world? According to Yousef Wahbah, MENA Head of Transaction Real Estate at multinational professional services firm Ernst & Young, Dubai hotels hold value as they don’t rank in the top 10 cities in the world for most expensive hotel stays.“The key cities that rank as the most expensive in terms of hotel stays typically reflect those of the most expensive cities in the world overall.” He says the top 10 most expensive cities are Moscow, Lagos, New York City, Hong Kong, Zurich, Geneva, Paris, Sydney, London, Rio de Janeiro.

Grant Salter, Real Estate – Hospitality at Deloitte Middle East, tells Al Shindagah that the Turks and Caicos Islands commanded the highest Average Daily Rate (ADR) globally as of February 2014 with ADR of over US $730 across the market. “It is interesting to note that the Indian Ocean and Caribbean Islands make up seven out of the top 10 destinations with the highest ADR.

However, he adds, “If we ignore these island destinations, Monaco tops the list of most expensive destinations by market ADR.” Paris, Caracas and Lake Geneva closely followed.

There may be some surprises in the top 10 most expensive cities for hotel stays, like Abuja in Nigeria, which ranked fifth above New York and Dubai. “These are market wide average rates only (provided by STR Global) and some cities will have a few hotels with extremely high ADR such as Abuja in Nigeria which has very few hotels and extraordinarily high demand which gives rise to ‘artificially’ high rates,” he adds.

Monaco has the highest market wide ADR primarily due to the nature of the market which is in the main supplied by high end hotel properties. “The Principality of Monaco is a relatively small market with less than 20 quality hotels and with high demand for hotel accommodation and relatively limited space for additional inventory, pricing has remained high,” Deloitte points out.

Dubai Stats

Salter says that Saudi Arabia is by far the biggest source market for visitors to Dubai with almost 1.4 million visitors in 2013. India is also a significant contributor to visitor volumes to Dubai with just below 0.9 million visitors closely followed by the UK at 0.75 million for 2013. US visitors numbered just less than 0.5 million with the Russian Federation at 0.43 million visitors.

Dubai has established a reputation on high end luxury and carved out a name for itself as both a business and leisure destination. “The main purpose of visit to Dubai is for leisure purposes with almost 70 per cent of total visitors being leisure related. Business visitors make up just over 30 per cent of those visiting Dubai. Proportionately, the ratio of leisure visitors has increased slightly over the last 10 years as the range of leisure activities and hotels has increased,” he says.

“There is a lot of new supply coming to market in the next few years driven by a number of factors including the Expo 2020 award, incentives by Dubai Government to grow tourism visitation to 20 million visitors by 2020 and to double the room stock in the market,” he adds.

“Dubai is working hard to promote the development of tourism and leisure facilities which will help to stimulate higher levels of visitation and grow the length of stay in Dubai. It is through this activity and other government initiatives that the impact of the planned doubling of room stock will be mitigated. Future mega events are also being considered to keep the demand for tourism high and maintain Dubai’s position in the top rankings for international and regional tourism.”

An Affordable City

The Economist Intelligence Unit (EIU) recently released its 2014 Worldwide Cost of Living survey which said Dubai ranks among the most affordable cities in the world. In fact, Dubai is in the bottom onethird among global cities in terms of cost of living. And in case you are wondering where the most expensive place to live is? Singapore ranked the highest dethroning Tokyo. The biannual report, which ranks 131 global cities, credits currency appreciation, solid price inflation and high costs of living for Singapore's dubious new distinction.

The world's most expensive cities to live in 2014

1. Singapore

2. Paris

3. Oslo, Norway

4. Zurich, Switzerland

5. Sydney

6. Caracas, Venezuela

6. Geneva, Switzerland

6. Melbourne

6. Tokyo

7. Copenhagen, Denmark

Source: Economist Intelligence Unit

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