DUBAI—Nearly all 10 planned hotel properties on Dubai's Palm Jumeirah archipelago have seen setbacks.
The US$12-billion artificial island is a flagship project constructed by United Arab Emirates-based developer Nakheel, a subsidiary of the Dubai government that sent shockwaves throughout the region after defaulting on US$26 billion dollars of debt last November.
espite the spate of impending openings there have been setbacks, said Duba i's PricewaterhouseCoopers advisory partner Mohammad Dahmash.
The "majority of hotel properties on the Palm have been delayed, mainly due to the global economic crisis," Dahmash said. Hoteliers, including Fairmont Hotels & Resorts, Rixos Hotels, Kempinski, Mövenpick Hotels & Resorts and Sofitel, have all pushed back their launch dates "by an average of two years when compared to their initial opening dates," he said.
For June year to date, the area of the Palm Jumeirah, Al Barsha and beaches saw an occupancy increase of 4.0%, which could have been helped by the average daily rate decrease of 9.9% for the same time period, according to STR Global data. Revenue per available room dropped 6.3%.
The hardest-hit Palm Jumeirah project, however, continues to be the US$600-million Trump International Tower. Construction here has not only been "held up," but also leveled, Dahmash said.
David Savage, the managing director of the site's contractors, Al Habtoor Leighton Group, confirmed the development in an interview with Property Wire.
"We're finishing off the ground leveling and will be leaving the site in the next month," Savage said. "Nakheel stopped the contract but we kept working with them to get the site closed up."
STR Global data indicates—while the information includes data for more than just the Palm Jumeirah—the area already saw a 14.2% supply increase June YTD in year-on-year comparisons. Demand, luckily, was up 18.7% for the same time period.
Those committed to their island outposts have cited efforts to optimize their Palm Jumeirah properties through several restructuring strategies. The Swiss-based Kempinski brand, for example, opted to upgrade their site from residential apartments to hotel residences, as well as create new facilities—such as a gym, spa, three food and beverage outlets, a kid zone, business center and future proofing five-star hotel grade systems.
"We have decided to add further investment into the properties that will enhance value from (both) the customers and guests point of view," said Jamie Wilson, director of asset management, for EPG Hotels & Resorts, Kempinski's development partner. "Naturally with the world economy we have been cautious with the development of the hotel and residences. The global economic climate has made our suppliers much more competitive, as well as raising the bar on quality and deadlines."
For now, Kempinski plans on opening the Palm Jumeirah hotel division in October 2010. This will be the second hotel in Dubai for Kempinski. Their first, located in the Mall of the Emirates, was completed in 2006.
Mövenpick, one of the most ambitious hoteliers in the UAE, admitted construction delays have pushed back the opening date of their Palm Jumeirah Royal Amwaj property. Yet Andreas Mattmuller, senior VP for the hotel's Middle East and Asia division, doesn't see the delay as singular, but one that mirrors a global slowdown.
"We did experience some delays in the construction of the properties on Palm Jumeirah, similar to most other developments," Mattmuller said. "The recent downturn did slow down the progress somehow. This trend could be experienced all over the world. However, the hotels are going ahead and construction is advancing very well now."
The hotelier has plans to open 21 hotels in the Middle East, with a total of 17 in the next three years. Although most of these ventures were conceived during the boom, Mattmuller feels optimistic about Mövenpick's concentrated investment both in the region, and more specifically in Dubai. "Although average rates have declined during the recent economic downturn, occupancy levels have been consistently high and we are very positive, if not bullish, for the long term future here in Dubai," he added.
First-quarter 2010 revenue per available room for the city, according to Dahmash, remains one of the highest in the world. "Value packages offered by hotels are continuing to attract visitors and stabilize occupancies despite the increase in supply," he said.
"The resilience of the hotel performance is evident how successful Dubai had been in positioning itself as a tourist destination that caters for the corporate, MICE (meetings, incentives, conventions, exhibitions) and leisure visitors."
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