New projects of real estate market of MENA

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According to the report of the company Lodging Econometrics, the hotel real estate market in the Middle East and Africa continues to be replenished with new projects. The report of the Trend Report indicates that currently there are 875 projects with a total number of funds 216 045 units at the implementation stage in the region.

There are 594 projects in the Middle East, and their total numbered stock is 170,490 units, which is 23% higher than last year. Thus, the volume of hotels being built in the Middle East has been increasing for the 16th consecutive quarter. 358 projects are already under construction, and work on 127 more projects will begin in the next year.

Hotel real estate continues to play an important role in the hospitality sector of Dubai, despite the decline in hotel performance in the II quarter of 2018.

This dynamic is associated, first of all, with the seasonal decline of tourist activity. Thus, the average level of occupancy of Middle Eastern hotels, according to STR, in the II quarter decreased by 3.5%. The analytical company EY already predicted a decline in the hotel industry in the MENA region, explaining this by a significant reduction in business trips to the region in the summer: the number of business events in the region is now at a minimum.

And as for June this year, the level of occupancy of hotels in the emirate was 77%.

It should be mentioned that the tourist flow is growing steadily. The stable development of the hotel real estate market of Dubai and its hotel sector is also reflected in the data of the Department of Tourism for the past half-year.

In the first half of 2018, 8.1 million foreign visitors visited Dubai, which was slightly higher than last year’s figure of 8.06 million. However, the department expects that the figures in the second half of the year will be much better. Officials rely on a significant influx of tourists from Russia and China, as well as new advertising campaigns, which the department conducts in China.

As always, India, Saudi Arabia and the United Kingdom became the largest directing markets.

Reduction of tax fees from hotel guests in the UAE will also have a positive impact on the tourist flow.

In June 2018, the authorities of the two largest emirates of the country – Abu Dhabi and Dubai – announced the reduction of municipal tax fee from the hotel sector. In Dubai, the municipal tax, which is charged on the cost of accommodation and meals in hotels, was reduced from 10% to 7%. In Abu Dhabi, the decline was more significant: a total of 10% to 5.5%, not including a reduction in the fixed fee for each night in the hotel from 15 to 10
dirhams from the UAE (from 4.1 to 2.7 US dollars).

Reduction of the tax burden on hotels and restaurants of the UAE as a whole (Dubai and Abu Dhabi) will be a positive moment for attracting clients to theUAE.

Undoubtedly, in 2018 the industry will not be able to avoid some of the challenges, the most important of which is growing competition. Nevertheless, the analysis of the hotel real estate market of the UAE in recent years shows its ability to restore quickly the balance of supply and demand due to the continuous increase in the number of guests.