Abu Dhabi’s tourism industry is cited in the government’s Abu Dhabi Economic Vision 2030 as being one of the sectors that will help achieve sustainable and diversified economic growth in the emirate. Hotels will play a major part in contributing to the growth of the emirate’s tourism economy, but with the possibility of an oversupply of rooms at the end of this year, supply and demand of hotel rooms will need to be closely monitored.
Abu Dhabi currently has 17,240 hotel and hotel-apartment rooms, a dramatic increase compared to 12,470 rooms in April 2009. Room stock will see further growth this year, with 10 hotels due to open. According to the Abu Dhabi Tourism Authority, the emirate’s hotel capacity will reach more than 27,000 rooms by the end of 2013. Desert retreats such as Qasr al Sarab,and five-star hotels on Yas and Saadiyat Islands and in the Grand Mosque District, are all contributing to the growing room inventory in the emirate.
Despite the global financial crisis having an impact on many companies’ travel budgets, in May 2010, Abu Dhabi recorded a 14% increase in guest numbers across its 116 licensed hotels and hotel apartments compared with May 2009. But the increase in hotel room supply has placed competitive pressure on occupancy and revenue, which both dropped year-on-year by 19% to 65% and by 5% to AED362m respectively.
Having welcomed 1.5 million hotel guests in 2009, the emirate’s tourism authorities expect hotel guest numbers to continue to rise, and have set an ambitious goal of reaching 2.3 million tourists by 2013.
Historically, the sector in Abu Dhabi has been dominated by business tourism, with 80% of all hotel guests currently arriving in the emirate for business, rather than for leisure. But it is in the leisure sector that the government sees growth opportunities for the tourism industry – and specially, for hoteliers.
High-profile sponsorship and marketing campaigns have led to increased awareness of Abu Dhabi as a cultural destination for leisure tourists, as landmark projects such as the Saadiyat Island Cultural District take shape. The Louvre Abu Dhabi, part of the Cultural District project, is due to open in 2012, while the Ferrari World theme park on Yas Island opened in November this year.
The overall demand and supply conditions are currently relatively balanced in the Abu Dhabi hotel market; however, the sector faces potential oversupply risks in light of the recent, dramatic increase in the supply of hotel rooms.
But the development and expansion of the Abu Dhabi National Exhibition Centre – part of the new Capital Centre Project (a large development which includes a cluster of eight hotels) and the opening of Al Ain Convention Centre, which is scheduled for 2012, will have an impact. Both projects will help generate further hotel demand specially within the meetings, incentives, conferences and exhibitions segment of the hotel market and will enable the emirate to expand its events portfolio.
The global financial recovery will ultimately ensure that Abu Dhabi’s hotel sector enjoys strong growth in line with government targets. But as new hotels continue to open, the emirate’s tourism industry must work hard to manage supply and demand – and avoid room rates, and consequently hotel revenues, plummeting.