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Market Research Report On The Hospitality Industry In Dubai UAE

By Edith Henderson,2014-07-18 12:48
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Market Research Report On The Hospitality Industry In Dubai UAEthe,The

    Paul Russell

    ID: UM3267BPM7972

    Market Research Thesis Report

    On the Hospitality Industry

    In Dubai, UAE.

    A Final Thesis Presented to

    The Academic Department

    Of The School of Business and Economics

    In Partial Fulfilment of the Requirements For The Masters Degree in Project Management

    Atlantic International University

    June 2008

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    Foreword

    My motivation for this report is driven by my passion for the Hospitality industry and its many facets. In producing this research report I had to rely on a lot of co-operation from many professionals within the industry and numerous tourism reports by the UAE government sectors.

    Without the assistance of the numerous hospitality professionals that I have received the completion of this report for my Master‟s

    Degree would not have been possible. I would also like to thank my wife who has to suffer my constant studying and complaining when I am struggling to compile information.

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    Table of Contents

1.0 Introduction

     1.1 The Hospitality Industry in the Middle East

     1.2 Construction Costs per Room

     1.3 Over Capacity and Resourcing

     1.4 Rising Ecological and Environmental Concerns and the

     Growing Regional Response

2.0 OVERVIEW OF DUBAI HOTEL PERFORMANCE

     2.1 Luxury Hotels Supply and Demand Summary (2007)

     2.2 Luxury Hotel Room Occupancy Indicators (2000-2006)

     2.3 Luxury Hotel Bed Occupancy Indicators (2000-2006)

     2.4 Luxury Hotel Average Room Rate Indicators (2000-2006)

     2.5 Luxury Hotel RevPAR Indicators (2000-2006)

     2.6 Luxury Hotel Revenue Indicators (2000-2006)

3.0 COMPETITIVE SET ANALYSIS

    3.1 Competitive Set Overview

    3.2 Competitive Set Room Mix and Sizes

    3.3 Competitive Set Key Performance Indicator

    3.4 Competitive Set Key Performance Indicators Evolution

    (2005-2007)

    3.5 Competitive Set Seasonality Indicator (2006)

    3.6 Competitive Set Rate Comparison

4.0 SUITE PERFORMANCE

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    5.0 APPENDIX: DUBAI HOTEL HISTORIC SUPPLY INDICATORS (2005)

    5.1 Luxury Hotel Supply Indicators (2000-2006)

    5.2 Luxury Hotel Room Supply Indicators (2000-2006)

    5.3 Luxury Hotel Bed Supply Indicators (2000-2006)

    6.0 APPENDIX: COMPETITIVE SET PERFORMANCE INDICATORS

    (2005)

7.0 APPENDIX: ROOM FEATURES

    7.1 Burj Al Arab

    7.2 Jumeirah Beach Hotel

    7.3 Madinat Jumeirah: Mina A‟Salam

    7.4 Madinat Jumeirah: Al Qasr

    7.5 Madinat Jumeirah: Dar Al Masyaf

    7.6 The One and Only Royal Mirage

    7.7 6.7 Ritz Carlton

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    General Information

    Tables

    Table 1-0 New Hotel Guest Rooms Supply by Country (Rooms) Table 1-1 Dubai Hotels Supply and Demand Summary (Q1 & Q2 2007)

    Table 2-1 Competitive Set Overview

    Table 2-2 Competitive Set Unit Types and Sizes

    Table 2-3 Competitive Set Unit Types Distribution

    Table 2-4 Competitive Set Key Performance Indicators (Jan-April 2007)

    Table 2-5 Competitive Set Key Performance Indicators (2006) Table 2-6 Competitive Set BAR Comparison

    Table 2-7 Competitive Set BAR Variance Analysis

    Table 3-1 Competitive Set Suite Performance Summary (2007) Table 4-1 Dubai Hotels Supply and Demand Summary (2006)

    Figures

    Figure 1-1 Five Star, Four Star and Other Hotel Room Occupancy (2000-2006)

    Figure 1-2 Five Star, Four Star and Other Hotel Bed Occupancy (2000-2006)

    Figure 1-3 Five Star, Four Star and Other Hotel ARRs (2000-2006) Figure 1-4 Five Star, Four Star and Other Hotel RevPAR Indicators (2000-2006)

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    Figure 1-5 Luxury Hotel Revenues (2000-20006) Figure 1-6 Five Star Hotel Revenue Indicators (2000-2006)

    Figure 1-7 Four Star Hotel Revenue Indicators (2000-2006)

    Figure 1-8 Total Revenues per Hotel (2000-2006) Figure 2-1 Competitive Set Occupancy Evolution 2005-2007 Figure 2-2 Competitive Set Average Room Rate Evolution 2005-2007

    Figure 2-3 Competitive Set Seasonality 2006

    Figure 4-1 Luxury Hotel Supply (2000-2006) Figure 4-2 Luxury Hotel Room Supply (20002006) Figure 4-3 Luxury Hotel Bed Supply (20002006) Figure 5-1 Competitive Set ARR and OCC (2005) Figure 5-2 Competitive Set-Select- Seasonality2005

    Glossary of Terms

Abbreviation Description

    AED Dirham

    ARR Average Room Rate

    CAGR Compound Annual Growth Rate

    DTCM Dubai Department of Tourism and

     Commerce Marketing

    DXB Dubai

    F&B Food & Beverage

    GCC Gulf Co-operation Council

     2 MSquare Meters

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    MICE Meeting, Incentive, Conference and

     Exhibitions

    OCC Occupancy Levels

    RevPAR Revenue per available Room

    U.A.E United Arab Emirates

    USD United States Dollars

    Market Research Report On the Hospitality

    Industry In Dubai, UAE.

1.0 Introduction

    Tourism in the UAE is the economies fastest growing area, and Dubai takes the lead as the fastest growing holiday destination in the history of the travel industry according to the WTO (World Tourism Organisation). Worldwide tourism growth remains at an average 3.7% for the rest of the world whilst the Middle East hit the 10.2% highs in 2006.

    Dubai‟s hotels also have one of the highest RevPar worldwide therefore attracting numerous hotel investors and developers eager to cash in on the lucrative market.

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    According to Arthur de Haast, Global CEO of Jones Lang Lesalle, the onslaught of hotel and related leisure projects in the Middle East region is justified by the expectations of sustained growth in demand.

    With this as a backdrop the following report has been generated benchmarking key properties and indicators as an investment tool for potential investors in the hospitality industry in Dubai.

    This Market Research report has been compiled using a variety of information using traditional research methodology and reports by the UAE tourism board and interviews with a variety of professionals, whom will remain nameless, from a variety of Hotels within the region.

    The main function of this report is to provide investment information for any developer in the UAE whom wishes to invest in the Hospitality industry and especially the lucrative five star hotel market in Dubai

    Although there is a general lack of transparency within the industry due to its increasingly competitive nature all information present is as accurate as I can possibly achieve and all supplementary methods have been utilized to check the accuracy of the figures.

1.1 The Hospitality Industry in the Middle East

    Whilst the current growth in hotel supply in the Middle East is based on future targets of a promise land, the current results in the industry indicate that they are on the right track.

According to HVS‟s international research approximately 253 new

    hotels will be coming on line over the next four years giving an additional 120,000 guest rooms. This is a pure addition to the current amount of rooms available and excludes the enormous Dubailands project. Dubailand (Bawadi) alone has a reported sixty thousand hotel room with one hotel „Asia Asia‟ having a

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    reported 6,000 guest rooms in one hotel (Arif Mubarak, CEO Bawadi).

    The vast quantity of these guest rooms are in the UAE, which accounts for almost 60% of all new supply. In Dubai alone the following quantity of guest rooms are reported to be entering the market (Chris Clarke 2008);

    ; 2008 27,000

    ; 2009 18,000

    ; 2010 13,000

    ; 2011 20,000

    Figure 1-0 - New Guest Room Supply by Country (Rooms)

    Years 2008-2009

Source: HVS International Research 2007

1.2 Construction Costs per Room

    Construction costs in June 2007 were running at approx USD $500-600,000 per room for a high end five star project. With recent inflationary pressure caused by market forces costs in the construction industry have escalated, MEED (Middle East Economic Digest) estimate an average room cost of 1.5 million per room at

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    May 2008. This is an increase tripling of construction costs in a one year period in the UAE.

    The table below highlights the wide variation in constructions costs per room for a selection of recently announced projects where the costs and number of rooms were published.

    These projects sit in a wide range from US$700,000 to US$20,000,000 and are for developments currently master planned with released figures.

    Country Project Price No. of Price.

    /Emirate USD Rooms Per

    Room

    Bahrain Banyan Tree $170mil 156 $1.08mil

Jordan Ayla Oasis $1.4bil 600 $2.33mil

Oman Salalah $1.4bil 700+ $2mil

Saudi Arabia Red Sea T.P. $40bil 557,000 $0.7mil

Abu Dhabi Desert Island* $3bil 150 $20mil

Dubai Bawadi $54bil 60,000 $0.9mil

Fujairah Mina Al Fayer $163mil 200 $0.81mil

Ras Al Bab Al Bahr $327mil 290 $1.12mil

    Khaimah

    *Includes for the entire Desert Island development (source: Global Futures & Foresight Hotel outlook 2020)

1.3 Overcapacity and Resourcing

    The sheer scale of the newly announced developments coupled with those already underway raises the issue of whether the region is facing the risk of overcapacity.

    With occupancy levels running at over 80% as demonstrated in tables inside the report, and record revenues of US $329 per night

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