Dubai Property Market Proves a big draw with International Hotel Chains

Dubai International airport has just released its figures for July which shows a 6% increase on last year and the first time monthly traffic has passed five million travelers. The airport remains on target to hit 56.5 million visitors this year and they hope, 98 million by 2020.

With those kind of figures banded around, it is hardly surprising that the International Hotel chains are expanding heavily in the Dubai property market and the Middle East in general.

There are 577 in Dubai at the last count in Q1 of 2012 according to Dubai Tourism and Marketing Commerce (DTCM), but that number is heavily weighted towards the high-end luxury market.

Where the big boys are looking to expand is in the mid to low-end hotels. The cheap and cheerful; allowing visitors from all over the world to experience Dubai without paying through the roof – average Dubai room rates are close to AED 1,000 per night.

The InterContinential Hotels Group (IHG) recently announced that the InterContinental Dubai Marina would open by the end of 2013, but it was what Taras Ettl, Vice President, Development, Middle East and Africa, IHG told Gulf News about its mid-scale properties which caught our eye: “Holiday Inn and Holiday Inn Express are growing at pace, with 50% of our development pipeline across India, Middle East and Africa now made up of these two brands.”

Dubai is certainly in need of more mid-range hotel options, especially in Burj Area and Dubai Marina, where many of the tourist attractions are located, so it is a positive sign that this section of the tourism market is set to be well catered for in the coming years.

In another report this week, Jones Lang LaSalle Hotels said that opportunity and private equity funds completed US$ 519 million of select-service hotel purchases this year through July. That’s an increase of 19% year-on-year, again highlighting the strong moves investors are making in the hotel and tourism industry.

It is also an area where developers in the Dubai property market are turning their attention in a big way in the coming years. While the majority of real estate clients don’t have the cash to set up, manage and operate an independent hotel chain, a hotel or serviced apartment in a managed tower is certainly an attractive way of getting into this lucrative market.

Dubai currently has just 200 serviced apartments, suggesting this is also an undersupplied opportunity, but there are many more coming online. DAMAC Properties only recently reported that Burjside Boulevard, a luxury hotel apartment tower over looking Dubai Mall in the Burj Area, will complete in Q1 of 2013. The company added that they are targeting 4,000 ‘key’s’ under the management of its new arm, ‘DAMAC Suites & Spa’ which will manage its serviced apartments division.

The huge benefit here falls not just to speculators, but to the many people who own a property in Dubai but stay in it just a couple of months each year. For the remainder owners can benefit from a rental pool scheme whereby their property is rented out and managed by DAMAC Suites & Spa.

The opportunity to get into and benefit from the hotel industry has never been easier in Dubai and will certainly catch the eye of many investors. With the capital growth adding to the rental returns we expect quite a few people to switch their portfolio to be more heavily weighted to this sector, rather than the money markets which are sitting relatively stagnant.

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