Frank Knight notes Abu Dhabi’s inroads in luxury sector

Abu Dhabi is making significant inroads in the luxury hospitality sector, but there is a need to differentiate with upcoming supply, according to a report by Frank Knight. 

The St Regis Saadiyat Island.
The St Regis Saadiyat Island.

While Abu Dhabi’s hospitality market saw subdued performance in the years leading up to 2013, the market has since gone from strength to strength, with three consecutive years of RevPAR growth.

Ali Manzoor, associate partner at Knight Frank, said while Abu Dhabi has historically been driven by corporate and MICE visitation, “leisure tourism has seen a boost over the past few years supported by the development of leisure demand generators including Saadiyat Island, Yas Waterworld, Yas Mall, and the Du Arena”.

“This trend is expected to continue as future demand generators such as the upcoming Cultural District are completed,” he continued.

“As a result, the more diversified demand base should be less susceptible to external forces.”

The declining oil price has had an impact on visitation in the capital, with many hotel operators indicating that there was a softening of corporate demand particularly in terms of oil and government related visitation.

With oil prices forecast to fall further in 2016, this trend is likely to continue – however this is anticipated to be counterbalanced to some degree by increasing leisure demand.

“The luxury hotel sector in Abu Dhabi has undergone rapid transformation since 2011” noted Manzoor.

“’With a compound annual growth rate of 16% in luxury hotel rooms between 2011 and 2015, the market has seen the introduction of several luxury hotel developments including two St. Regis properties, the Sofitel, the Ritz Carlton, the Anantara and the Rosewood, which has made the luxury sector a fiercely competitive one.

“Luxury hotels which do not have clear differentiators are finding themselves in an increasingly precarious position, and the anticipated future supply poses a further risk.”

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