Back To Latest Articles

Dubai Forecast 2015

Resilient Dubai adapts to ever-changing market

Focus on Dubai, United Arab Emirates

5th January 2015

LONDON—despite changing market dynamics, Dubai’s outlook is projected for positive growth; according to reports provided by STR Global and Tourism Economics. 

In 2014, Dubai hosted several large events which drove revenue per available room (RevPAR) to peak levels of 711.65 AED in April. On a year-over-year basis, this contributed to a performance drop which indicated a -5.9% RevPAR decline in April 2015 to 669.81 AED. However when April 2015 is compared to April 2013, this represents a +2.4% increase on Dubai’s normal market performance.

RevPAR has dropped predominantly as a result of a decreasing average daily rate (ADR), for several reasons. Although room rates dropped in the first 5 months of 2015, Dubai maintains the second highest worldwide ADR on a year to date basis of 248.44 USD; with New York and Paris ranked first and third.

Over the last 12 months, Dubai has further diversified its target demographic to off-set the drop in visits from markets such as; Russia, Ukraine, UK, Germany and the rest of the Eurozone. Both the Euro and the British Pound have weakened against the US dollar, and in turn have weakened against the Dirham; resulting in the UAE becoming a more expensive destination. In order to generate additional demand, Dubai is looking east and marketing to more rate sensitive customers, which impacts the ability to maintain average room rates that Dubai has experienced in the past. 

A further disruption in demand growth for Dubai has been partially facilitated by a recovering Egyptian markets. For example, Cairo has seen RevPAR increases of +48.0% in April 2015; as a result of the travel advisories lifted in August and a return of political stability to the area. Tourism Economics predicts Egypt will see an increase in traveller arrivals of +9.0% throughout 2015, as holiday travellers seek less expensive and comparable alternatives to Dubai. 

Extended EU sanctions on Russia are also likely to prolong a decline in departures from Russia and impact the demand for hotel rooms throughout Dubai. Tourism Economics data reported departures from Russia were -10.7% lower this year than in 2014.

While supply growth is expected to slow down over the next two years to +4.2%, Dubai investment and development remains encouraged due to Dubai being the host city for Expo 2020. Q1 2015 has seen Dubai’s supply increase by +7.7% and is projected to grow +4.2% by December 2015, with the opening of several large properties in key markets. Demand for Dubai has seen an increase of +5.6% in Q1 2015 and is projected to outgrow supply by year end 2015.

It is important to note that as new properties are added to the STR Global database; historical data is updated, impacting the forecast report figures for 2015. Traveller demographics visiting Dubai are changing and expected to see increasing demand from more price sensitive markets such as India, China and other Asian countries; which will keep demand growth high with lower rates than previously experienced. Overall, the long-term outlook for Dubai is positive, as demand continues to grow and encourage further investment opportunities. Following short-term rate disruption, RevPAR growth is predicted to return to positive values by August 2016 with greater ADR increases projected for 2017 and 2018.

How is your market predicted to perform in the future?

To find out how macro economic factors could be affecting your hotel in the future, start receiving forecast data today with the Market Forecast Report from STR Global.