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Hotel Rooms in Dubai Predicted to Increase Along with Demand


Report Cites Impressive Figures

Dubai is expected to see an estimated 18,000 to 20,000 more hotel rooms by 2010, an increase of almost 100 percent on the number of rooms currently available, fuelling the risk of oversupply, according to a recent report entitled, "The Dubai hotel market. Hot or soon to overheat?" prepared by international consultants, HVS International in late 2005.

But although these figures look alarmingly large, there is good reason to think that Dubai will be able to absorb such a large increase in rooms.

The report states that given the historical growth in hotel demand, the forecast public spending on tourism in the emirate, and the current and future projects that are being developed in Dubai, "we expect demand to experience an average annual growth of 7-10 percent over the next five to 10 years."

Dubai condo hotel

Photo by Rashid Shah ....

If growth were to continue at such levels "this could imply that demand growth is likely to catch up with supply over the next few years," states the report. Current occupancy levels which approach 90 percent could by 2010 stabilize at 70-75% which is comparable to what is seen in some of the U.S.'s strongest markets like Orlando, Florida and Las Vegas, Nevada.

Moreover, because Dubai has a stronger economic base than most other hotel market destinations in the Middle East, and the emirate benefits from possibly the best tourism infrastructure in the region, "this might, in turn, reduce the negative impact of the new supply," the consultants stated.

At the other end of the spectrum, significant opportunities are believed to exist in the emirate for the development of branded limited service or three- -star hotels. Other investment opportunities in Dubai are also believed to lie in developing extended stay and timeshare properties, condo hotels, fractionals and other types of shared ownership properties.

Dubai condo hotel

Photo by Rashid Shah ....

A greater volume of international capital, notably from Asia and Europe, is forecast to flow into Dubai's hotel industry.

Europe is the main feeder for the five-star hotel market in Dubai, accounting for 47 percent of total demand.

The GCC and non-GCC Arab countries, account for another 27 percent.
Published plans also exist to attract the Turkish, Pakistani, Indian, Chinese and Iranian markets over the next three to five years. The government is also working on developing the cruise market to Dubai.

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