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Abu Dhabi facing oversupply of hotels with new developments

There has already been a decrease in the occupancy of hotel rooms which could further decrease with the addition of new developments.

Around 20 new hotels are expected to open in and around Abu Dhabi over the next few years according to TRI Hospitality Consulting.

There is expected to be at least five hotels of the Marriott chain as well as five by Rotana however, there is said to be an oversupply of rooms available, which analysts expect will continue until the demand starts to catch up.

According to the Abu Dhabi Tourism and Culture Authority (TCA) the number of rooms available has increased by 13 percent since May 2011 but hotel occupancy in May reached 63 percent which is seven percent less than last year.

According to TRI, since January this year hotels have seen an average room rate (AAR) and revenue per available room (RevRAR) decrease by 16.5 and 15.6 percent respectively. This resulted in a 20.8 percent decrease in profitability.

Peter Goddard, Managing Director of TRI Hospitality Consulting in Dubai said: “We do not envision the situation to improve in the capital in the near future as corporate and conference demand continues to slow on the back of lower business activity, especially in the wake of the continuing European debt crisis.”

With the oversupply of rooms available it is expected that hotels will have to adjust their rates to suit. However, Goddard said that hotels won’t be making as much as they used to with the more upscale ones taking a much stronger stand on rates.

He added: “If they drop their rates it’s going to affect their overall perception.”

On the other hand, recent reports have highlighted that neighbouring Dubai has booming rates of tourism with the emirate remaining the most buoyant in terms of tourism increases.

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