Inflation and geopolitical tensions will impact Dubai’s hotel market

Rising geopolitical tensions and inflation could impact demand in the hospitality market in the UAE and other parts of the Middle East, leading to a slower recovery, according to a new report from Colliers provided that.

Most markets in the region have so far shown year-on-year improvement in the first half of the year as demand picked up after the easing of COVID-19 related restrictions.

Hotel occupancy rates in the UAE are still expected to be between 64% and 77% this year, which is higher than other markets in the region.

Occupancy levels in the country’s major markets will also be up from last year, with the exception of Sharjah and Fujairah, where occupancy is expected to decline by 1% and 3%, respectively.

“However, increased geopolitical tensions, rising oil prices and a significant increase in inflation have affected key inbound source markets in the region, leading to a slower-than-expected recovery,” Colliers noted.

“When taken into account with an increase in outbound travel from the region, this has reduced the rate of recovery in domestically oriented markets.”

Impact in the UAE

In the United Arab Emirates, which is highly dependent on demand from international markets, geopolitical tensions could suppress demand from Eastern Europe and Asia, particularly in the Commonwealth of Independent States (CIS) region. , which includes Russia, Armenia, Azerbaijan, Belarus, Moldova, and Tajikistan, among others.

“Growing instability in key CIS source markets is expected to suppress demand, with the biggest impacts expected in Dubai and Ras Al Khaimah,” Colliers said.

“Given the diversity of source markets for the UAE, additional hotel demand may be induced from alternative markets at lower price positioning.”

Other Middle East Markets

Hotels in Riyadh and Jeddah have seen increasing demand as pilgrims return. However, Colliers said, an increase in overseas travel could reduce the positive impact.

Occupancy rates in Saudi Arabia are expected to be between 52% and 63% this year.

In Doha, Qatar, occupancy levels fell in the first half from a year earlier, even though this year’s FIFA World Cup is expected to bring “super-normal levels” of demand throughout its duration during the last quarter of the year. The average occupancy rate in the Gulf state is expected to reach 70% this year.

Kuwait City, Muscat and Manama will be among the worst performing markets in the Gulf region, with expected average occupancy rates of 34%, 52% and 47%, respectively.

(Reporting by Cleofe Maceda; editing by Seban Scaria)

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