Why competition is heating up for Dubai's luxury hotels

Dubai's hotel market is not only growing but it?s also evolving as developers and operators put their own twist on luxury.

May 14, 2018

Iconic hotels like the 7-star Burj Al Arab have put Dubai at the top of the list for travelers seeking luxurious amenities and world-class service.

More than 60 percent of the city’s hotel supply is in the upscale and luxury category, but with a plethora of launches over the past 12 months and a strong pipeline of openings, the market is not only growing but it’s also evolving as developers and operators put their own twist on luxury.

Last year saw the launch of the 110-room Bulgari Resort which, being the only hotel situated on the offshore Jumeirah Bay island, is positioning itself as an urban oasis for guests seeking a slice of Italy in the Middle East.

For the Bulgari Resort, and other new luxury hotels like The Four Seasons hotel in Jumeirah and Nikki Beach Resort & Spa, Dubai’s status as one of the world’s most upmarket destinations is a real draw.

“There are many reasons why Dubai is continuing to attract luxury hotels,” says Amr El Nady, Head of Hotels and Hospitality Group, MENA at JLL. “The area around Jumeirah is the place to be for opulent brands and is an ideal launch pad for operators that plan to roll out across other key markets in the Middle East. The city’s highly-efficient transport infrastructure and busy airport make the city very accessible to a steady flow of both business and leisure travelers.

“When you combine these factors with the opportunities offered by Dubai’s Expo 2020, it’s no surprise that luxury brands want a piece of the action.”

A healthy hospitality market

Dubai is set for a whole host of new luxury hotel openings in the coming months, including the Mandarin Oriental Jumeirah Beach and W The Palm in Palm Jumeriah, yet so far figures suggest there is enough demand to meet supply.

Average occupancy in the luxury space stood at a healthy 75 to 79 percent in 2017 and the average room rate is still in the US$300 to US$350 range. Room rates have reduced over the past three years, but El Nady says the slowdown is easing.

“The new openings are expected to create a bit of a glut in the room rate, however occupancy is still expected to remain resilient in the high 70 percent range over the next couple of years,” he adds.

Increasing choice for guests

The new hotels are bringing more diversity for the city’s tourists, who comprise around two thirds of hotel guests with business travelers making up the remainder. The majority visit from nearby Saudi Arabia and other Middle Eastern countries, in addition to the UK, China and Russia. Not all can afford the $1,200 a night price tag to stay in the Burj Al Arab but visitors are still looking for high quality accommodation – often with the standard luxuries of rooftop pools, spas and fine dining.

“Competition among Dubai’s luxury hotels is heatting up, so brands are looking at ways to differentiate themselves, meaning visitors have more choice than before,” says El Nady. “Some developers are trying to appeal to the budget-conscious traveler by introducing upscale properties at a more affordable price. Others are focusing on providing a greater entertainment offering. It’s no longer enough to simply provide a top-class service.”

Indeed, the latest addition to Dubai’s luxury hotel scene brings a touch of history to a very modern city. The QE2, one of the world’s most famous cruise liners from the 1960s, has been refurbished as a luxury floating hotelcomplete with restaurants and a museum charting the ship’s previous life, docked in Dubai’s port.

New hotel operating structures are also starting to emerge. Rather than sticking to standard management agreements, some hotels are entering into joint ventures and partnerships that give them added flexibility. El Nady says these new structures are changing the way operators view Dubai, providing a further boost to the case for opening up a hotel in the city.

“In the next few years I think we’ll see more hotel owners setting up their own operating platforms, which could drive further innovation in the luxury market,” he adds. “Meanwhile, Dubai is set to continue to be an attractive city for hotel brands for the foreseeable future, so I suspect there will be further openings and new ideas just around the corner.”

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