I am involved with the hotel business in Abu Dhabi in a daily basis where this involvement translated into many things, one is a huge database. i decided to share some of the information which i am sure available elsewhere but why not give a special treat to our Dinar Chat listeners.

also please note that the below and what will be published was taken from older papers i have written before.

— here we go —

1 Abu Dhabi Real Estate Market

The real estate market in Abu Dhabi witnessed a remarkable shift since 2005 due to the aggressive plans defined in “Plan Abu Dhabi 2030” to transform the emirate into a business and leisure hub on an international scale. With an announced supply of ~ 2 million m² office space[1] , ~1 million m² leasable retail space[2], and 38 announced hotels to be developed by 2015[3], Abu Dhabi is to witness a significant market change from today until 2015 when many major developments are expected to be completed. The following sections will give a brief overview of the hotel, office, and retail market.

1.1 Abu Dhabi Hotel Market

Demand for hotel accommodation enjoyed a growth of 16% (guest nights) in 2007 and are expected to increase by another 16% in 2008[4]. Moreover, Abu Dhabi International Airport registered a record year in 2007, with a rise of 31% in total passengers (6.926 million Passengers) and 15% in aircraft movements compared to 2006[5].

Occupancy across the quality hotel market in Abu Dhabi decreased slightly from 79% in 2006 to 78% in 2007[6] due to the fact many hotels were undergoing refurbishment programs, such as the Intercontinental and Sheraton Abu Dhabi Resort and Towers. However, the time series shown in Figure 7 impressively shows the surge in hotel performance in both Average Occupancy Rates (AOC) and Average Room Rates (ARR) since 2005. In particular, the hotels witnessed a significant 27% increase in ARR to AED 869 in 2007 compared to AED 680 in 2006[7].

Source: Hotelbenchmark Survey, Monthly Bulletin January 2007

On the Supply Side, developers, investors, and hotel operators have realized the increasing shortage of room availability in Abu Dhabi and potential business opportunities. There are currently 39 hotels within the Abu Dhabi Island area, 18 of them are within the branded luxury hotels according to the Abu Dhabi Tourism Authority (ADTA) report in the fourth quarter of 2007. In 2007, 38 branded hotel developments were announced and to be opened by 2015. As Figure 8 illustrates, ADTA projects an induced demand that will grow yearly by an average of +12% to top 8,920,600 room supply and 6,244,544 sold rooms in 2015[1]

Due to the significant increase in demand for hotel accommodation in Abu Dhabi, we expect the current undersupply to last for another 2-3 years, indicating further increase in RevPAR as no substantial supply will enter the market until 2010 and 2011.

In general, the hospitality market in Abu Dhabi is just emerging and current undersupplied within all product segments, whether targeting the leisure, business, MICE, budget, mid-market or luxury segments. The market is set to be redefined within the next 5 to 10 years where supply standards, location competition, and demand nature are changing quickly.

1. It is expected the hotel market will diversify in terms of product where new luxury resort hotel operators are to fill an ever growing niche market. The Ritz-Carlton, Angsana Resorts & spa, Banyan Tree, Four Seasons, Jumeirah Luxury Resorts, Hyatt Hotels and Resorts, Oberoi Hotels and Resorts, and Anantara Spa have all signed agreements with developers to manage their properties within the different projects in Abu Dhabi.

2. Business demand targeting mid market hotels seems to be neglected by investors where only 10% of the recently announced hotels will be positioned in the mid market segment.

3. The hotel market is expected to geographically diversify due to the “Plan Abu Dhabi 2030” which launches new hotel destinations such as Saadiyat Island, Reem Island, and Yas Island.

4. Adding new luxury resorts and allocating new beach front properties will attract new demand to the market. Business travelers have been making up to 80% of the current demand in both business and resort hotels. The introduction of the Ferrari Island (Yas Island), Louvre Museum, and Guggenheim Abu Dhabi will attract leisure travelers to the market

 

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References:

1- HVS international - Kuwait Hospitality market snapshot 2007

2- AlQabas Article on the Kuwait Future Generations Fund

 

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