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Abu Dhabi: hotel building continues

Long overshadowed by Dubai, Abu Dhabi has made a place for itself in the sun. The steady growth of its tourist arrivals and its hospitality results is attracting increasing numbers of international hotel groups to the Emirate, by associating themselves with extensive real estate projects. Abu Dhabi is focusing on this sector to diversify its economy and free itself from its dependence on the oil industry.

Of the seven emirates that make up the United Arab Emirates, Dubai and Abu Dhabi are undoubtedly the best-known. And for a good reason: after making their fortunes in oil, they turned to the tourism industry in order to diversify their economy and sustain growth. Abu Dhabi has a significant advantage in terms of territory as its surface area represents 85% of the UAE. The emirate is divided into three regions: Al Gharbia, Al Ain and Abu Dhabi, where Abu Dhabi City, the federal capital of the UAE, is located.

The Emirate of Abu Dhabi had set a goal for itself to reach 3.1 million visitors last year, and in the end it welcomed 3.49 million, a figure surpassing all forecasts. Arrivals thus progressed by 25% between 2013 and 2014, causing the number of nights realized at the destination's properties to shoot up. Growth at hotels is by 22% with 7.96 million nights, to which must be added 3.89 million nights at apart-hotel properties. To meet this growth in demand, eight new hotels opened their doors last year, adding 1,766 new rooms to the supply in the emirate. International chains in particular joined the market, such as Courtyard by Marriott with Courtyard by Marriott WTC, a 180-room property.

While arrivals at the destination have been climbing for several years, the Abu Dhabi Tourism & Culture Authority remains prudent regarding the current fiscal year, announcing a goal for 3.5 million tourists by the end of the year. This is because of the increased value of the dollar against the euro which could cause regional tourists from the Peninsula to favor travel to the Old Continent to benefit from more advantageous prices. The concern is even greater since these tourists represent 25% of tourist nights realized each year in Abu Dhabi. Nonetheless, industry results since the beginning of the year suggest new record arrivals for 2015. Tourist arrivals are up by 20% on the first four months of the year, and the number of nights has increased by 11%.

The year began well for the hotel industry

Abu Dhabi's hotels produced positive performances at the beginning of the year. Occupancy was up on the first three months of 2015 before a little upset in April (-0.8 points) followed by a significant drop in May (-3.1 points), according to data from MKG Hospitality. The level nonetheless remains high with an average occupancy rate of 81.9% on the first five months of the year, up by 0.6 points over the same period in 2014. From January to May, the 10.4% increase in average daily rate allowed the Revenue per available room (RevPAR) to climb by 11.3%.

Abu Dhabi was able to sustain growth in its results despite an increased supply in the first quarter of 2015. Two major openings took place during this period with the arrival of Tryp by Wyndham and the Swiss-Belhotel Corniche, adding more than 330 rooms to the emirate's hotel market. Other developments are expected by the end of the year as well such as the Millennium Bab Al Qasr with 677 rooms and the Grand Hyatt Abu Dhabi with 368 rooms.

The hotel supply will continue to develop in the years to come

In Abu Dhabi, construction rarely comes to a standstill. International hotel groups are developing at the destination through management contracts with local real estate developers, private investors and even the sovereign fund ADIA which is very active in hotel development. As these different actors wish to strengthen the hotel supply with international standards, North American hotel groups in particular continue to position themselves on Abu Dhabi's market.

Among the most awaited developments is the 34-floor, five-star hotel by the group Four Seasons Hotels & Resorts that is scheduled to open next spring. The local real estate promoter Mubadala Real Estate & Infrastructure will be the owner of the property. InterContinental Hotels Group, meanwhile, will also have a new five-star unit in 2016. The InterContinental Abu Dhabi Grand Marina will have 184 rooms in a seafront location. IHG will also add a pre-existing hotel to its portfolio: the Sands Hotel, which is currently owned by the local company Pearl Azure Hotel Management, will soon become a Holiday Inn. Starwood Hotels & Resorts will also launch its lifestyle brand Aloft Hotels in Al Ain after opening a property in Abu Dhabi City (2009). The hotel will have 172 rooms and will open in September 2016. Finally, the Marriott brand Edition will open in Abu Dhabi in 2017.

The emirate must nonetheless diversify its hotel supply. In fact, 3/4 of the rooms that make up its supply are positioned on the four and five star segment, leaving little room for the economy hotel segment.

The leisure supply grows, while convention tourism remains steady

Abu Dhabi ranked 23rd in the Asia ranking by the ICCA, which establishes how many major international conventions (with 22 events) are organized at international destinations. The emirate dropped down a rung since 2013, while Dubai progressed: with nineteen additional conventions, the destination climbed from fifteenth to twelfth place with 56 events, the best performance in the Middle East.

The emirates appeal also comes from its events business that is well developed. Several athletic and cultural events are held there such as its professional tennis exhibition tournament with some of the best players and especially its Formula 1 Grand Prix on Yas Island. Organized since 2009, these two events take place every year in January and November respectively. As for culture, a major event that will take place at the end of the year should truly boost the destination's appeal and the hotel industry: the opening of the Louvre Abu Dhabi, which is scheduled for December. Sometime in the next few years the Guggenheim will open a branch as well.The emirate is investing heavily in culture to help expand tourism.

The Abu Dhabi 2030 plan as a growth engine

While Abu Dhabi remains prudent with regard to the evolution of tourist arrivals in the short term, it is much more ambitious in the long term. The plan for Abu Dhabi 2030 includes a very large economic expansion and receiving 7.9 million visitors within the next fifteen years. In order to double its tourist arrivals, the destination must necessarily increase the number of rooms available on its tourist accommodations market. According to what is included in its development plan, the hotels that are intended to host leisure tourists will be located on the islands, while those for business tourism should develop near business centers and the international airport. Hotel developers will be able to benefit from Government developments that will boost activity in several areas. Among the developments planned are an extension of the airport, a redevelopment of Saadiyat Island, which will become a cultural center (with the Louvre and Guggenheim museums, in particular), and also the development of Yas Island, a neighborhood dedicated to entertainment,  including the Ferrari World theme park. In all, 74,500 rooms (hotels and apart-hotels) are expected to be built by 2030 in the urban area of Abu Dhabi. This figure does not take into account the development of the regions Al Gharbia and Al Ain that are west and east of Abu Dhabi. This is not particularly surprising as the Emirates have always encouraged development on artificial islands, rather than in the desert. From a tourism and hospitality perspective, Abu Dhabi is more akin to a bustling market than a desert.

Also read:

  • IHG set to expand in UAE
  • Abu Dhabi invest in Hong Kong hotels
  • Abu Dhabi’s Tourism and hotel industry grow

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