Dubai hotels may see weaker performance on VAT impact: JLL

Hotels in Dubai may see performance weaken in 2018 as the negative impact of value-added tax (VAT) kicks in, real estate consultancy JLL said in a new report.

“High levels of occupancy and performance are likely to decline with Ramadan in May and then the relatively quiet summer season,” said Craig Plumb, head of research at JLL MENA.

Dubai hotels experienced a 3 percent drop in average daily rates (ADRs) in the first two months of 2018, compared to the same period last year.

However, occupancy rates remained robust at 86 percent across the city in the first quarter.

“While ADRs continue to decline it is expected that hotels in the upper segments will start to show signs of rate stabilization, or at least a further slowdown in the pace of decline, as operators are not willing to dilute their brands’ market perception,” Plumb said.

Dubai also continued to see openings of new hotels in the midscale and upscale segment in Q1, with greater exposure from major global operators as well as local players.

Elsewhere in the United Arab Emirates, an increase in the number of available hotel rooms in Abu Dhabi weighed on room rates and revenue performance in the first quarter of 2018, even though  occupancy levels rose 5 percent.

ADRs dropped 16 percent year-on-year (YoY) to $117, while revenue per available room (RevPAR) declined by 12 percent to $92, the report said. Total hospitality stock reached 22,000 units in the first quarter.

Occupancy rates reached a high of 79 percent, thanks to the lifting of visa restrictions for Chinese tourists, with the number of guests staying at hotels up 15 percent year-on-year (YoY) in Q1 2018 to 405,850.  

“With the UAE now undertaking increased business with China, the hospitality sector has witnessed positive sentiment,” said Peter Stebbings, Head of Abu Dhabi operations, JLL.

“The notable increase of Chinese visitors is supported by Abu Dhabi's Department of Culture and Tourism Authority's investment into Baidu, the Chinese equivalent of Google, which commenced in Q4 of 2017. Attractions such as the opening of The Louvre Museum continued to boost visitor numbers from France,” he added.