Abu Dhabi’s appetite for regional growth
Hotelier Middle East explores the opportunities and challenges ahead for Abu Dhabi.
Abu Dhabi’s hospitality market faced a challenging 2018 as hotels remained reliant on corporate and government sectors, government austerity and reduced corporate spending resulted in a drop in demand.
However, domestic tourism remained the city’s main source. According to Abu Dhabi’s Tourism and Culture Authority, the number of hotel guests in the city in 2018 increased by 3.9% to 5 million with the average length of stay increasing to 2.6 days.
Occupancy rates for the city represented a marginal increase of 0.5% to 76.6%. Although demand levels increased, average rates remained soft, falling 6.3%to US$125.4m as hoteliers adopted to reduce prices in order to maintain market share.
But the situation could be about to change for Abu Dhabi through a range of tourism-related partnerships set up by the government.
Among the initiatives set up by the Department of Culture and Tourism for Abu Dhabi to boost tourism levels is the recent partnership with mixed martial art federation, UFC, to bring the sport to the UAE capital for the next five years from September this year.
Speaking to the press, Abu Dhabi’s chairman for the Department of Culture and Tourism, Mohamed Khalifa Al Mubarak, said the move would bring “heightened impetus” to visitation for the emirate and will boost incoming tourist numbers.
But what will these initiatives mean for Abu Dhabi’s hotel operators in the UAE for the future and what challenges does it pose for Dubai’s hotel sector?
According to Abu Dhabi’s Tourism and Culture Authority, the hotel market experienced a 7% increase in supply last year, currently standing at 168 properties with 32,971 keys.
In terms of implications for Dubai, Atlantis Resorts and Residences’ executive vice president and managing director, Timothy Kelly, told Hotelier Middle East that regional competition is growing and developments could impact Dubai's hotel market.
“Because we’re (Atlantis) a destination ourselves, we compete against other destinations. I’m more concerned about the regional competition and some of the developments that they are working on that could shift the consumer decision away from Dubai.”
Kelly adds that a combination of great prices, offers and product in Abu Dhabi could be potentially worrisome for hotel properties in Dubai.
“You have to listen to what travel trade partners have to say. What they’re sharing with us is that some of these destinations [Abu Dhabi] have great offers, product with service and a great price. Therefore when you have these three variables they’re able to sell the product. My concern is that when they do this, they’re obviously going to be shifting the consumer business away from Dubai to their market.”
Saadiyat Rotana Resorts & Villas also revealed that every weekend it is offering local guests staycations in order to escape the “hustle and bustle” of the UAE.
Speaking exclusively to Hotelier Middle East, Marc De Beer, general manager for the resort, said: “Within the resort and Rotana Group, we offer multiple ‘staycation packages’, from a brunch escape to a golf weekend or a romantic stay we can cover every segment of the local market.
“To promote these offers, we usually use our team on the ground, the sales, but we have also developed a strong social media engagement on our platforms and use it to spread the word around the region,” he added.
Other hotels that are showing signs of progression in the UAE capital is the Abu Dhabi National Hotels (ADNH), who recently launched a company that will manage hotels for other owners under the name Abu Dhabi National Hospitality Management.
ADNH CEO Khalid Anib revealed that the division is already operating one property in Dubai, but he would not say which hotel group and added that franchising or third-party management is the future of the Middle East.
“[Third-party management] is something that will grow substantially in the Middle East. The market in the Middle East is becoming sophisticated and mature, and therefore owners are looking for different alternatives when it comes to the management of their properties.”
What operators are saying?
Many hotels have entered UAE’s capital within the last 12 months including Abu Dhabi’s “first” fully all-inclusive resort in Abu Dhabi under the Rixos brand. The Marriott took over the Viceroy property at Yas Island Circuit, and is expected to relaunch the property under its contemporary luxury W Hotel brand - the first W hotel in Abu Dhabi.
Yas Island revealed that it would be increasingly turning towards emerging markets to drive visitor numbers in the future through Experience Hub, the trade and promotion arm of the Abu Dhabi complex.
Yas Island added that it achieved 28 million visits in 2018 and is targeting a figure of 48 million by 2022.
One of the other operators entering the market was Saadiyat Rotana Resorts & Villas, who recently celebrated its first anniversary. The group told Hotelier Middle East that they had witnessed a strong increase in multi-generational family travel from its international guests since its opening.
“Our aim is to accommodate the whole family, from kids’ activities to fun and exciting dining experiences,” said Marc De Beer, general manager for Saadiyat Rotana Resorts & Villas.
“First year has exceeded expectations, despite a slight contraction in the market overall. Saadiyat Island generates its own demand and appears to be somewhat less dependent on local economic factors but much more so on economic and political issues in or source markets (Europe, CIS). The Island has grown from two resorts to five. This is broadening the awareness of Saadiyat as a destination, tapping into new markets, but of course, is also putting pressure on rates and occupancy.”
What does the future hold?
Abu Dhabi faced a decline in most key performance indicators for 2018 and the market is expected to bottom out by the end of 2019 as hoteliers adopt new yielding strategies on the back of stable demand, according to Tri Consulting.
“The city will face significant supply increase in 2019 as the project pipeline is limited to a small number of properties,” said Tri Consulting’s former director Christopher Hewett. “The main challenge hoteliers will face is striking a fair balance between maintaining occupancy and average rates, particularly as the strong dollar reduces the spending power of visitors from the UK and Europe.”
Meanwhile, Colliers International’s head of hotels for the MENA region, Christopher Lund, echoed Hewett’s views on pressures for Abu Dhabi, but believed leisure tourism would be boosted in the UAE capital through its mid-market space.
“The Abu Dhabi hotel market has come under pressure in recent years off the back of lower oil prices, which has effected the corporate market especially,” said Lund. However, there has been renewed efforts to boost leisure tourism in particular, which has been helped with the opening of new demand generators such as the Louvre Museum and Warner Bros Theme Park.
“Going forward, we see potential growth in the mid-market space, especially for mid-market resorts which are relatively under developed in the city.”
Although Abu Dhabi’s hotel market looks likely to remain compressed for 2019, there are signs of recovery for the market.