Hospitality 'overcapacity' risk for Emaar in Dubai

Ratings agency Moody's warns of 'market exhuberance' in emirate

The Address Dubai Mall, one of the hotel's in Emaar's portfolio
The Address Dubai Mall, one of the hotel's in Emaar's portfolio

Emaar Properties’ hospitality and retail activities are providing it with a strong buffer against market volatility, although the risk of overcapacity hangs over the company, according to Moody’s Investors Service.

The ratings agency has issued its latest report on the company, in which it notes that tourism growth and political stability has underpinned Emaar's recurring revenue expansion.

However, it is urging investors to be cautious, warning in a release for the report that “market exuberance runs the risk of overcapacity”.

Did you like this story?
Click here for more

"Emaar's pre-sales model and construction-linked payment plan mitigates development risk, while its hospitality and retail assets provide a cushion against market volatility", said Rehan Akbar, Moody's analyst and author of the report.

"However, there is a risk that the company embarks on a significant multi-year capital spending plan in the current market up-cycle to not only launch new developments but also expand its hospitality and retail assets at a time when competitors are increasingly becoming active in these sectors, which could create overcapacity."

Moody's notes that footfall at Dubai Mall has witnessed compound annual growth rates of 25% since 2009, while Dubai's hospitality sector in 2013 recorded the highest profitability within the Middle East and North Africa for the fourth consecutive year.

Its investment grade rating to Emaar Malls Group reflects its view that Emaar's retail subsidiary will remain fairly strong in a scenario of sluggish domestic economic growth.

In the first quarter of 2014, revenues from Emaar Properties’ hospitality and leisure business were up 16% year-on-year, with the company's flagship Address Hotels and Resorts delivering strong occupancy figures.

The division recorded revenues of AED483 million (US $132 million) during the period, representing over 21% per cent of the company’s total revenue.

For all the latest hospitality news from UAE, Gulf countries and around the world, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page.

Most Popular

Newsletter

Reports

Human Capital Report 2017

Human Capital Report 2017

The second annual Hotelier Middle East Human Capital Report is designed to explore the issues, challenges and opportunities facing hospitality professionals responsible for the hotel industry’s most important asset – its people. The report combines the results of Hotelier Middle East's HR Leaders Survey with exclusive interviews with the region's senior human resources directors.

Hotelier Middle East Housekeeping Report 2016

Hotelier Middle East Housekeeping Report 2016

The Hotelier Middle East Housekeeping Report 2016 provides essential business insight into this critical hotel function, revealing a gradual move towards the use of automated management and a commitment to sustainability, concerns over recruitment, retention and staff outsourcing, and the potential to deliver much more, if only the industry's "image problem" can be reversed.

From the edition

From the magazine