Hotel apartments in Dubai rising in popularity
Serviced apartments are on the increase in the GCC, and soon you’ll be able to buy your own hotel room.Neil Churchill August 11, 2015
There’s certainly no shortage of 5-star hotels in Dubai. Sometimes it feels like there’s one for every grain of sand in the desert.
But few residents ever really experience the 5-star palaces in all their glory. Dining in one of the restaurants or paying for a day pool pass isn’t the same as sinking into a hotel-quality King size bed every night.
But there is something of a solution, and it’s the reason hotel apartments in Dubai have become more prominent in recent years.
Gloria Hotel in Dubai’s Internet City was one of the first to offer serviced apartments as accommodation. But since then, several local and international players have entered the market, and now hotel apartments are a vital part of Dubai’s accommodation industry.
Vincent Miccolis, GCC manager of The Ascott Limited, the world's largest owner-operator of serviced residences, believes hotel apartments have the region’s booming construction market to thank for their rise in popularity.
“The population growth driven by the Gulf’s diversification strategies, in particular the mega infrastructure projects, is strengthening the demand for longer-term accommodation,” Miccolis says.
“The hotel apartment sector is benefiting from an increased influx of expatriates working on longer term assignments, requiring accommodation of up to a year. The rise of hotel apartments in Dubai, and across the GCC, continues to get stronger for both consumers and investors."
But it’s not only the tourism and construction market that has resulted in this mini-boom of hotel apartments. Many Dubai and GCC residents themselves are choosing luxury serviced accommodation.
Local developer Damac knows this well, and has implemented clever techniques to give a financial incentive back to the owners of their serviced properties. “Our starting point is always ‘listen to the market’. If you supply the market with what it wants then you succeed,” says Ziad el Chaar, managing director of Damac Properties.
“This is why our Damac Maison hotel apartments are so successful – we listened to the customer. When the buyer is not using the unit it goes into a rental pool and works like a hotel room, with the customer receiving part of the revenue.”
Miccolis agrees, and says that the business model of a serviced apartment proves a very cost effective strategy for investors due to the flexible operating structure.
The GCC’s taste for the finer things in life should not be ignored either. Miccolis acknowledges that it is largely what serviced apartments offer that standard properties do not, that makes them so appealing.
“Security, service and international standards of accommodation are key drivers to the increased demand of hotel apartments across many GCC countries,” he says. “Through a diverse mix of motives such as space, in-room facilities, personalised service and security, the demand for quality serviced apartments in this region is very strong.”
The market doesn’t appear to be slowing down anytime soon. According to The Ascott Limited, investment across the region continues to be robust with a forecasted 97,000 rooms to be opened leading up to 2020, while Ascott itself is more than tripling the number of units it has in the GCC over the next two years.
Surprisingly perhaps, the least penetrated market in the GCC for branded serviced apartments is Saudi Arabia. Although Ascott is looking to change that with four properties planned for Jeddah and one in Riyadh over the next 16 months.
However, it may not be long before luxury serviced apartments are no longer the pinnacle of this niche industry. What if the dream became a reality; from owning a hotel apartment, to owning an actual hotel room?
“We’re going to build the Paramount Hotel Downtown [above], which will be the third biggest hotel in Dubai,” says El Chaar.
“People will be able to invest in the hotel – they can buy their own room and use it for 15 days a year free of charge, and receive 40 per cent of the revenue for the rest of the year.
“For people who want to invest in hospitality but they can’t buy a hotel, they can buy one or even five hotel rooms.”
Here at EDGAR, we’ve long been champions of living life out of a hotel; all the best rock stars have done it. Mr El Chaar, put us down for a 2-bed, please.