The hotel sector continues to be the best performing of the Dubai real estate market achieving an average occupancy rate of 78 per cent in July, according to a new report by property expert Jones Lang LaSalle (JLL) Mena.

The growth has been mainly driven by a major increase in the number of GCC nationals visiting Dubai, up 80 per cent compared to the same period last year, the JLL said in its latest "Dubai City Profile – September 2011."

The Dubai hotel sector growth in July is a significant one compared to 60 per cent recorded in the same period the previous year, it added.

According to the JLL, the regional upheaval has re-enforced Dubai’s position as a global destination with many tourists rescheduling their holidays to the UAE due to volatility elsewhere in the region.

Dubai Airport is now the fourth busiest in the world, reporting a year-on-year growth in arrivals of 9.5 per cent, equating to around 12 million visitors in the first half of 2011, it added.

Thanks to the Arab Spring, there has been a rise in tourist arrivals to Dubai thus leading to higher occupancy and RevPAR levels (revenue per available room), the report said.

While the hotel sector has been the major beneficiary of the Arab Spring, the retail and residential sectors have also received a positive boost over the past 9 months, it added.

However this has yet to translate into increase in rents or prices but some locations are stabilizing, said the report.

According to the report, the retail sector has also benefitted from the unrest with major malls reporting an increase in foot traffic and sales activity.

GCC guests spend more on average than other visitors, although this was largely focussed in the major centres frequented by tourists such as Dubai Mall and Mall of the Emirates, said a top official.

"The Arab Spring has had a positive impact on hotel, retail and residential sectors of Dubai market. We believe this has helped push the hotel and retail sectors into the recovery stage and that selected sectors of the residential market are also improving," remarked Alan Robertson, CEO of JLL Mena.

"The question now is how long this impact will last before broader international issues undermine this upturn," said the expert.

"While the Arab Spring contributed to improved sentiment and stronger performance over the first half of the year, these benefits could be limited by the fluctuating financial concerns emanating from Europe and the US over the last few months," Robertson noted.

"The residential market has also seen an increase in demand particularly from those concerned with stability and security elsewhere in the region," he added.
 
The office sector has been the least affected although there has been some interest in the DIFC from international banks currently based in Bahrain, said the JLL report.

"The ongoing political and economic stability of the UAE is likely to continue to bring in longer term benefits for the Dubai property market," said Robertson.

"However a more sustainable recovery requires this upturn to be converted into broader economic activity that helps to boost employment, but there is little sign that this is happening yet," he added.

The Dubai hotel market will continue to be positively impacted due to the upward trend in tourist arrivals expected over the remainder of 2011, the JLL said in its report.

This will be largely due to the effects of the Arab Spring and Dubai status as a regional safe destination. During 2011, average occupancy rates have increased considerably, it stated.

Craig Plumb, head of research for JLL Mena, said the lesson from the global financial crises of 2008/9 is that the Dubai market is closely tied to events in the broader global economy.

"The ongoing debt issues in both the US and the Eurozone could therefore have a negative impact on Dubai over the final quarter and into 2012 if they result in a slowdown in global economic activity."

"Unlike other markets in the region, affordable housing is not a major issue in Dubai. Falling prices have resulted in improved affordability, although a shortage of larger units remains with some families continuing to commute from Sharjah and the Northern Emirates," he added.-TradeArabia News Service