UAE-based developer Seven Tides commissioned Deloitte to issue a report analysing the current supply and future demand potential for luxury serviced apartments located on Palm Jumeirah in Dubai.
The newly released report entitled 'Assessment of Luxury Serviced Apartment Provision for Palm Jumeirah Dubai' states that the Palm Jumeirah is likely to remain the prime location for luxury hotel and serviced apartment provision in Dubai, with demand being driven by increasing tourist arrivals to Dubai and increasing tourism infrastructure provision in the Emirate.
Martin Cooper, Director, Real Estate, Deloitte Middle East states that "the Palm Jumeirah is set to remain as the prime luxury beach resort destination in Dubai, as further critical mass is established as new hotels open."
The findings in the report follow an announcement by the Dubai Department of Tourism & Commerce Marketing (DTCM), which plans to expand the Emirate's current accommodation offering by permitting the rental of furnished properties as short-term holiday lets through a new two-tier licensing system.
According to Dubai Statistics Centre figures, the serviced apartment sector has shown steady growth over the last five years with a compound annual growth rate for number of guests and length of stay increasing by 14% and 19% respectively; with strong interest from GCC nationals in particular.
Performance over the last 18 months at the nine high-end hotels on Palm Jumeirah shows sustained growth with an annual average occupancy of 68.1%, Average Daily Rate (ADR) of AED 1,734 and Revenue per Available Room (RevPAR) of AED 1,221 in 2012. Between January and July 2013 the figures were 71.6%, AED 1,678 and AED 1,243 respectively.
"This ADR and RevPAR stability, and rise in occupancy levels, reflect the strong fundamentals driving sustained growth in Dubai's tourism and hospitality market and has a complementary effect on the serviced apartment sector with branded units charging around AED 2,000 per night during peak periods, according to the Deloitte research. This confirms that there is latent demand for units on Palm Jumeirah and that those that are part of a full service luxury beach resort have a distinct advantage in terms of ROI potential," said Abdulla Bin Sulayem, CEO of Seven Tides.
"With the cost for one-bedroom units starting at AED 2.6 million, the potential for income generation from a managed rental perspective, based on the equivalent hotel occupancy figures and average year-to-date rates, is substantial – making it even more attractive to investors looking to build their overseas portfolios," he added.
The report also notes that luxury and upscale international standard operators have experienced performance consistently above market averages, concluding that the demand for luxury serviced apartments is likely to remain strong in the medium to long term buoyed by news of the Emirate's Expo2020 win and government commitment to expanding its already diversified tourism product.
Seven Tides' Anantara Residences Dubai, which welcomed its first tenants in Q4 2013, is one of several developments where unit owners stand to benefit from positive tourism growth for the Emirate, which expects to register 10.9 million visitors by the end of 2013, growing to a forecasted high of 25.8 million by 2023 according to the World Travel & Tourism Council.
"Palm Jumeirah currently has a total of 950 luxury serviced apartments managed by international hotel operators, and the Deloitte report confirms that the sector is continuing to mature and continues to attract a growing target market looking for a prime location and the luxury beachfront resort lifestyle," concluded Bin Sulayem.