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According to analytical studies, hotel real estate in the UAE holds the top position globally, surpassing even Turkey in terms of construction pace. Dubai, the most popular tourist destination, leads the way. Abu Dhabi comes second in terms of the number of hotel rooms under construction. Foreigners can own property in the UAE on equal terms with local citizens. Moreover, profitable investments can include not only homes and apartments in Dubai or other emirates but also commercial real estate.
Content:
- Introduction
- The significance of hotel real estate for the UAE economy
- The role of the hotel sector in attracting investments
- Current state of the hotel real estate market
- Infrastructure projects and tourism development
- Hotel real estate investment
- Conclusion
Introduction
Hotel real estate in Dubai remains a potentially lucrative investment. Yields start from 8% annually. The final ROI depends on the specific property, its prestige, and amenities. Let's explore how to buy a hotel room as property and what to consider when planning investments.
The significance of hotel real estate for the UAE economy
The hotel real estate market plays a significant role in the economy of the United Arab Emirates, influencing financial growth and the country's development. Here are some key aspects of its importance:
- Hotels annually attract millions of tourists, serving as a vital source of income for the country. This includes money spent on accommodation, food, entertainment, and additional services. Tourism contributes to diversifying the UAE's economy and promotes sustainable growth.
- The tourism industry is closely linked to the realm of additional services. It provides a substantial number of job opportunities for both local and foreign employees. These jobs encompass service positions and employment opportunities in management, construction, and IT.
- The construction of hotels aimed at attracting tourists further stimulates infrastructure development. To ensure quality service for tourists, there is a need to expand roads, transportation systems, and other facilities. This attracts investments in infrastructure and has a positive impact on the country's economy.
The role of the hotel sector in attracting investments
The construction and operation of hotel properties attract both local and foreign investments. This format is convenient for foreign investors due to its profitability. Not everyone can buy a hotel in the UAE, as it requires significant financial investments and business management. However, acquiring an individual room within a well-established and smoothly operating system does not require substantial expenses and relieves the owner from the need for additional property management actions. The hotel's management company handles all the necessary arrangements. As a result, everyone benefits: the government receives foreign investments, and the owner gains a stable income.
Current state of the hotel real estate market
The hotel real estate market in the UAE is in continuous development. Popular resorts in Dubai, Abu Dhabi, and other emirates attract tourists and investors alike. There is a constant demand for various categories of property in Dubai, ranging from hotel rooms to luxurious villas. All types of residential and commercial properties are in demand, with particularly high demand in popular tourist areas such as Downtown Dubai, Palm Jumeirah, and Dubai Marina.
Analysis of current supply and demand
According to Faisal Durrani, Head of Research at the analytical company Knight Frank in the Middle East, the hotel room inventory in the UAE continues to expand, helping sustain cities like Dubai and Abu Dhabi. According to TripAdvisor, Dubai has been the most popular destination globally for two consecutive years and has also been awarded for the highest occupancy rate in the world in the first half of 2023, reaching 78%. The active interest from major companies in this industry opens up extensive opportunities. Investors can choose individual units as well as consider buying a hotel in Dubai.
Key market players
Giant players in the construction industry actively participate in the development of hotel units. Accor leads the way, offering 71,820 existing rooms and planning to complete the construction of another 49,510 apartments by 2030. Following them is Marriott International with 63,790 completed rooms and 52,790 planned. In third place is IHG Hotels & Resorts with 35,140 current rooms and 22,120 in development. Also among the top five are Hilton Worldwide with 33,450 rooms and 39,860 projects and Radisson Hotels, offering 22,830 rooms and planning to build another 11,651 units.
Infrastructure projects and tourism development
Infrastructure projects play a crucial role in the development of tourism in the UAE and have a significant impact on the increase in rental real estate. Using Dubai as an example, you can clearly see this interconnection. Just in the last few years, the city has implemented numerous innovative projects, including:
- Dubai Expo 2020, which was postponed to 2021 due to the COVID-19 pandemic, became one of the most anticipated events. A special exhibition complex was created in the city, housing pavilions from different countries and infrastructure for hosting events.
- Dubai Creek Tower is a project that represents a building that will become one of the city's symbols due to its unprecedented height. While the tower is still under construction, it will attract tourists with its architecture and breathtaking views of the city.
- Museum of the Future was created as a place to showcase innovations and technological achievements of the future. The museum also contributes to the stimulation of cultural and scientific tourism.
These are just a few examples of changes in the city. The expansion of the metro and the public transport network in the metropolis also indicate infrastructure development that positively influences the tourism industry.
Impact of infrastructure projects on hotel real estate growth
There is a direct connection between infrastructure development and the hotel sector, which results in an increased tourist influx. The more tourists there are, the higher the demand for accommodation. For investors, this means the prospect of a stable income from renting out real estate.
Hotel real estate investment
Investing in hotel real estate in the UAE can quickly recoup the initial costs. In major cities, there are properties of different classes, ranging from luxurious 5-star hotels to more budget-friendly options. Investors can choose from various market segments based on their financial capabilities and strategy.
Attraction of the UAE for hotel sector investors
- Stable income source: Hotel rooms are always in demand.
- Ease of Profitability: In this situation, the owner is free from any actions. The hotel administration manages the apartments, eliminating the need to handle technical maintenance and tenant searches.
- Portfolio expansion opportunity: Real estate investments are potentially profitable as they steadily appreciate. Buying a hotel room and subsequently reselling it can be profitable.
Diverse investment forms and their features
For those planning to buy a hotel apartment in the UAE, there are several income strategies:
Guaranteed income program: In this case, the hotel provides the buyer with a guaranteed income and takes on the commitment to pay a specific percentage of the profit. Trust management is provided for a fee. For example, if the hotel's net income is 12%, the management company may take 7% in commissions and guarantee the investor a 5% return.
Non-guaranteed income: This type of income may be higher, but it comes with more significant risks. Economic crises, natural disasters, and global events can directly impact the market.
Conclusion
Hotel commercial real estate in the UAE have high investment potential. For those considering buying a hotel room or exploring the possibility of purchasing a villa in Dubai, we recommend visiting our platform. With over 100,000 listings for residential and commercial properties gathered in one place, our team is ready to provide advice on all matters related to the real estate market in the UAE and offer guidance on how to buy a hotel room for sale most advantageously.
