ABU DHABI: Stronger product offerings and continued investment in Abu Dhabi’s leisure and hospitality infrastructure look set to generate a rebound in the emirate’s tourism sector. While short-term headwinds could restrict growth and earnings this year, the medium- to long-term outlook for the sector is positive, according to a recent report released by property consultant Knight Frank, with upcoming projects identified as key drivers of continued expansion.
In the first quarter of the year, Abu Dhabi’s hotels saw guest numbers increase by 11% year-on-year (y-o-y) to 1.1m and guest nights rise by 10% y-o-y to 3.1m. However, there was a 2% y-o-y decrease in the average length of stay, according to data recently issued by Abu Dhabi Tourism & Culture Authority (TCA Abu Dhabi).
The shorter average stay contributed to a 0.4% dip in hotel occupancy, easing to 79% during the first three months of the year, with a bid to maintain occupancy rates by lowering room prices eroding revenue earnings early in 2016. Hotel revenues fell 6% y-o-y in the first quarter, down to Dh1.7bn ($463m), with revenue per room dropping 13% to Dh336 ($91). Average room rates fell to Dh425 ($116), marking a 12% y-o-y decrease, according to TCA Abu Dhabi.
A decrease in visitors from Russia and CIS, combined with the strong US dollar and slower economic growth in Europe and China, which is expected to continue through 2016, are among the factors impacting demand and profit in the short-term, according to Knight Frank.
However, Abu Dhabi’s commitment to developing its entertainment offerings as well as continued investment in airline infrastructure is expected to stimulate visitor numbers, adding to the sector’s optimistic medium- to long-term outlook. Opportunities also exist in the hospitality industry, as Abu Dhabi underserved in mid-market and budget hotel offerings, according to Knight Frank, with demand in these segments expected to rise as the product range is expanded.
