The hotel industry in Dubai could remain in the doldrums until 2012 and hoteliers may never again achieve the record room rates seen at the peak of the emirate's economic boom in 2008.
The consultancy said Dubai hotels' exposure to the tourism sector and an oversupply of luxury accommodation will likely delay a recovery in room rates, which witnessed a sharp decline last year amid the downturn in global travel.
Julian Kemp forecasts that room rates will start to improve globally in 2011, but "with a large proportion of demand for Dubai hotel rooms generated from the leisure sector, rate improvement may take longer toward the end of 2011 and beginning of 2012".
Dubai hotels had a dreadful year in 2009 as the global recession saw revenue and occupancy plummet as holidaymakers cut back on travel. Dubai generates around 19 percent of its gross domestic product from tourism.
Dubai witnessed the worst declines in revenues per available room (RevPAR), an industry benchmark, among any Middle East city last year with a drop of 31 percent to $163, while occupancy fell 10.2 percent to 69.4 percent, according to hospitality research firm STR Global.
The Middle East and Africa overall recorded a 13.3 percent drop in RevPAR to $95.44 and a 10.9 percent fall in occupancy to 62 percent, STR Global figures show.
Kemp said revenue and occupancy will remain under pressure this year due to economic uncertainty in some of Dubai's key tourism markets and the launch of new hotels that will exacerbate the current oversupply of luxury accommodation.
There are currently 28,153 rooms under construction in the UAE with a further 51,594 rooms in the pipeline, with Dubai accounting for the lion's share, according to STR Global.
"Whilst a number of hotel developments have been put on hold the ones that are due to open in 2010 are aimed at the 5-star and above markets. This places further pressure on hotels to achieve reasonable occupancy levels and thus a stronger argument for ARR (average room rate) to drop further this year," Kemp said.
He said the current oversupply and future pipeline will make it difficult for Dubai hotels to command the room rates it had prior to the economic downturn.
"In our opinion it is unlikely that Dubai hotels' will be able to achieve rates experienced pre the current downturn," he said.
