Is the Dubai Hospitality Sector Building for the Right Tourists?

ArabianBusiness reported last month that STR Global data showed Dubai hospitality supply increased 5.6% and demand also increased a whopping 8%, with occupancy up 2.3%. The average daily rate, however, fell 8.5% with a corresponding revenue decrease of 6.4% per available room.

When demand goes up but revenue goes down, the issue is rarely increased competition. It is a decrease in demand from the earlier, higher price point in favour of a new lower service price point.

In other words, either Dubai’s visitors all suddenly got poorer, or the economic demographic of Dubai’s tourists is sliding down the price curve. Given the number of fine dining restaurants that have elected to participate in all you can eat and drink brunches, my bet is on the latter.

What does this mean for Dubai hospitality? Build more three and four star hotels, or risk having five star hotels selling rooms at three star prices.