The construction of mid-scale hotels in Dubai, which has seen a boom in the last few years, could result in further declines in average financial returns going forward, a new report finds.

JLL’s Q3 2017 Dubai Real Estate Market Overview report has indicated a further 1,800 keys were added to the market in Q3, bringing the total stock of quality hotel rooms in Dubai to almost 82,200 keys.

Several hotel projects, mainly in the four and five star segments, have come into the market in the last year, including the Rixos JBR with 414 keys and DoubleTree by Hilton with an additional 238 keys in Business Bay.

READ: More than 80 hotels to open in UAE in 2018

 

Another trend in the market is the refurbishment of existing rooms, such as the renovation of the Atlantis in Palm Jumeirah, where 1,539 keys were released back into the market this quarter.

And with a potential 4,100 keys entering the market over the last quarter of the year and several other properties nearing completion in Business Bay, even more hotel rooms are expected to come into the market going into 2018.

Hotel performance remains under pressure however, with the YT August RevPAR (AED 503) being the lowest level seen in the last decade, though occupancies have hovered at a healthy 75% since the beginning of the year, according to the report.

READ: Is the GCC's hospitality segment facing oversupply?

“Although the strategy of many hotels across the city is currently focussed on maintaining high occupancy levels at the expense of daily rates, it is important to note that Dubai remains one of the strongest performing hotel markets globally in terms of RevPAr and other financial indicators.” The report notes.

Nonetheless, the decrease in the Dubai hospitality market performance is perceived as a market adjustment rather than an indication of distress.

“The outlook for Dubai remains positive, especially as the city continues to invest heavily in tourism infrastructure and diversify towards new source markets such as South East Asia,” the report added.