Dubai five-star hotel rates dive to $112 for May and June

Dubai five-star hotels enjoyed a nice rebound in occupancy and rates in the first few months of the year. But a combination of volcanic dust cancellations and the school year has sent rates tumbling for May and June.

The lowest rate on hotel.com for a night in a Dubai five-star hotel is $112 for the Metropolitan Palace in Deira, although visitors to the Arabian Travel Market this week heard that industry rates are as low as $84 per night.

Cut throat competition

This is cut-throat competition among hotels in a city that only last month boasted the highest revenue per available room in the world. Clearly the position of three and four-star establishments is going to be even more desperate in such an environment.

Competition is strongest on the Deira side of the Dubai Creek and also along the Sheikh Zayed Road near to the exhibition complex. A series of massive high-rise hotels have opened in this area over the past year while business life and exhibition footfall is much quieter than before the global financial crisis and local real estate crash.

So while hotel operators were singing the joys of spring occupany at the ATM this week, the reality of a difficult time ahead must also have been uppermost in management minds. July and August are also not traditionally strong months for hotels due to the Arabian heat, and then comes Ramadan.

It will not be until Eid Al-Fitr in mid-September that hotels can expect to fill up again. And by then the full impact of the volcanic dust aviation shutdown last month will be felt on forward bookings.

If anybody thought that the reported recovery of the Dubai hospitality and aviation sector this year looked a bit too good to last they are about to be proven right. Dubai hotels have no alternative but to discount rates to fill their rooms, albeit local residents often find it tough to get the same rates as those booking online from abroad.

New hotels on The Palm

This autumn will see new entrants to the five-star market such as the Ottoman-style Zabeel Saray by Rixos on the crescent of the Palm Jumeirah with 410 rooms and suites, set to open in September. Then in October the 293-room, six restaurant Royal Amwaj from Movenpick will also open on The Palm crescent with an all-in guest dining package available.

The One&Only The Palm is also due to open in October, a 100-unit, Arabic-themed, low-rise development with an over-water restaurant and spa. Last hotel to launch this year is expected to be the Jumeirah Al Fattan.

How such new hotels will be received in an already over-supplied market only time will tell but they are unlikely to achieve very high room rates if current prices are any guide.