Dubai needs to increase tourism 25% to offset hotel inventory rise

DUBAI Dubai need to draw an additional 2.5 million tourists annually to absorb a projected 60% growth hotel inventory over the next five years, an analyst says.

Occupancy rates and ADR in the glitzy emirate will likely drop unless tourism grows by about 25% by 2015, according to Alex Kyriakidis, global managing director of tourism, hospitality and leisure for Deloitte. Dubai’s hotel inventory is projected to climb to 80,000 guestrooms from its current 50,000 in that period.

Even if half of the expected construction is canceled, “15,000 rooms would be a fairly big increase for Dubai to absorb,” Kyriakidis tells Bloomberg. Dubai currently draws about 9.5 million visitors a year; if the full hotel build-out occurs, that figure would need to be about 12 million to sustain current occupancy and ADR, he says.

As it is, Dubai’s occupancy has already slipped to 70% from 80% in 2007, while RevPAR is down 20% in that timeframe to US$240.