Hotel occupancy rates are rebounding in the UAE, but rooms need to be renovated and future-proofed to ensure profits in the future, according to industry experts.
In February, hotels in Dubai had an occupancy rate of 91.6%, while the rate is usually between 75 and 85%.
The first quarter of 2022 showed signs of a strong recovery from the pandemic, with an increase in occupancy and revenue per room, allowing many players in the sector to target renovation.
Nearly half of all available hotel rooms in Dubai are over ten years old, according to a recent HDR report on accommodation supply and demand, citing data compiled between January and February 2022. Of the over 139,000 rooms registered, some 65,000 are over 10 years old, according to the report.
“A hotel should generally start considering refurbishing beds/mattresses around year five, curtains and carpets around year seven, and millwork/fittings/furniture/equipment (FFE) around year ten. The cycle The life of a hotel, if not renewed, begins to decline from the tenth year,” said Nathan Hones, COO/Partner at Carter Hones Associates.
“As visitors return to the UAE, hotels are open with high occupancy rates, putting more cash in hotel owners’ coffers. This allows them to reopen previously closed restaurants and restart their previously planned renovation plans, put on hold during the COVID shutdown period when operators had capped all spending.
“RevPAR (revenue per available room) dropped from a peak in 2009 – $353 – to $138 in 2019, a 60% decline. It shows that to maintain a constant occupancy level, hotel owners in Dubai lowered their RevPAR to attract customers to the hotel. However, the downward pressure on revenue has caused hotel owners to look for ways to diversify their revenue streams away from reliance on room rates.
Renovate to reap rewards
Hones said hotel owners and asset managers are looking for ways to increase revenue for existing hotels. “They look at different room types, occupancy levels and revenue throughout the year, making sure each room type maximizes its popularity and revenue,” he said.
Filippo Sona, co-founder of Wood Couture, said the UAE hospitality industry holds great opportunities for newcomers, with the current pipeline estimated at 44,459 additional room keys, according to STR Global’s May 2022 report. . “This new pipeline, combined with the 200,000 keys already in existence, will take the UAE towards a quarter of a million keys.”
According to the Wood Couture FFE Market Demand Index Q1 2022 report, UAE Furniture, Lighting and Equipment [FFE] The sector holds a market share of 36.58% of the total FFE market demand in the Middle East and Africa. This market share is estimated at $2,924,173.82 or 10.7 billion UAE dirhams.
Hones said hotels have a variety of renovation options, including upgrading, adding rooms, splitting rooms and adding other revenue-generating opportunities.
“Rixos Bab Al Bahar in RAK had many large family rooms with average occupancy but not much income from a standard suite. After exploring several optimization studies, we have divided the family rooms into two separate rooms, with a double key option. This added 80 keys to the property’s inventory and provided 160 renovated rooms at the same time, increasing not only revenue but also overall asset value.
Another example of an exciting project was the Jungle Bay water park at the Westin Mina Seyahi. “The water park was positioned on an underused lawn that was not drawing any revenue. It costs money for water and maintenance. So it was a bit unusual to reuse and renovate a patch of grass. While the water park is not a paid activity, not directly adding additional revenue, it is a differentiator and USP for Westin and Le Méridien hotels,” Hones said.
Tolga Lacin, area general manager, Marriott International, said preliminary work on the Jungle Bay project began in 2019. The land on which the water park was built was limited, previously used as a grass recreation area and for events and lounge chairs.
“We hired the best water park designers in Canada to maximize the use of space and brought in several designers and consultants for this project. The design was fully completed in early 2020 – around the time COVID-19 hit the world.
Despite the COVID situation, Lacin said that with the support of stakeholders, they decided to continue construction at the end of 2020 and construction was completed in less than 120 days.
“The park was open and operational in February 2021 and quickly proved to add tremendous value to our offerings to local and international travellers. Demand for our hotels has increased by more than 50% and we have seen the number of children in the resort double as well,” he added.
Oliver Dawson, director of business development at Aati Contracts (Al Tayer), warned that several hotels built more than eight years ago need to be renovated, but allocated renovation spending has often decreased.
“Clients are demanding that contractors bring more creativity with value-added materials and engineered solutions to their look. Some need lighter upgrades than major renovations, with upgrade rates of 95,000 dirhams per room.
“Yet there is a massive demand for a complete renovation of the hotel according to the needs of the operator. For example, we realized a 5 star hotel with prices for the complete renovation of a standard room [room and bath] between 120,000 and 125,000 dirhams, and some projects have been valued between 180,000 and 200,000 per room, depending on the level of renovation needed,” he said.
Dawson added that the requirements for the changes are diverse. “Some customers upgrade their hotel suites to standard rooms because their property at a particular location had more demand for standard rooms.
“Then some clients have done a complete renovation to have a family room on site – an adult bedroom connected to an adjacent room that has been converted into a children’s room with an attractive play area. Clients are also increasing their spaces F&B catering to increase the number of seats available with more indoor and outdoor options,” he added.
Ross Trivett, Managing Director of Khansaheb Interiors, noted an increase in project activity in the hotel renovation sector since EXPO 2020. “In some cases, investment delays have exacerbated the need to refurbish with faults, particularly in the mechanical, electrical and plumbing (MEP) and waterproofing, severely affecting the operations and running costs of some properties. »
He added that customers generally demand that refurbishment and upgrades be done with minimal disruption to the customer experience, thereby reducing the impact on the business.
“Therefore, the refurbishment is staggered around low season and only completed until stock is available, so if the property is operating at 85% occupancy, we can only take 15% stockout at the This typically results in longer renovation timelines and prolongs the risk of disruption to guest experience and hotel operations.
Trivett added: ‘Some clients, particularly those undertaking a major refurbishment, will have no choice but to close the property to allow for rapid and aggressive refurbishment during the low season. This renovation typically includes all BOHs and FOHs (back of house and front of house), and exterior areas as access is required throughout the property to replace MEP systems such as chilled water lines and plumbing hot and cold water. Due to the backlog of investments, we are seeing an increase in the number of projects falling into this category. »
“Our most recently completed projects include a design and build contract for the refurbishment of 250 keys and corridors at Movenpick Bur Dubai. This was a four month contract while the hotel remained in full operation.
(Reporting by Hina Navin; Editing by Charles Lavery; Additional editing by Anoop Menon)