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DUBAI - The world’s tallest **hotel opened in Dubai on Wednesday with cut-price room rates and an occupancy level of just 25 percent, a sign of the downturn that still grips the emirate’s hospitality market.
The 333-metre Rose Rayhaan, located on “the Strip” on Sheikh Zayed Road, overtakes the 321-metre Burj Al Arab as the world’s tallest building used solely as a hotel, a title the sail-shaped Dubai icon held for over a decade.
Operator Rotana Hotels opted for a low-key inauguration for the $180 million Rose Rayhaan in comparison to the celebrations that accompanied the opening of the Burj Khalifa, the world’s tallest building, two days earlier.
“I don’t think there is ever a wrong timing to open a hotel in Dubai. If you have a strategy and wide network of hotels and a large sales team, you can do well,” Omer Kaddouri, senior VP for UAE operations, said at a media briefing to launch the hotel.
Kaddouri said he expects occupancy to pick up as Rotana steps up marketing for the hotel, which operates under the hotelier’s alcohol-free brand Rayhaan Hotels & Resorts.
Rotana in November forecast occupancy levels of no less than 80 percent at the Rose Rayhaan.
The hotelier’s expectations are a far cry from current hotel occupancy levels in the UAE, which has been hit hard by the global recession as fewer tourists visit the Gulf state.
UAE hotels saw revenue per available room (RevPar), a key measure of hotel performance, slump 28.3 percent to 766 dirhams ($208) in November, while room occupancy declined 8.8 percent to 75.5 percent, STR Global figures show.
Rotana is offering rooms at the Rose Rayhaan starting from 400 dirhams a night.
Analysts forecast hotel revenues and occupancy levels will continue to come under pressure in 2010 as more hotels currently under construction come online.
There are currently 28,153 rooms under construction in the UAE with a further 51,594 rooms in the pipeline, according to STR Global.
Kaddouri forecast room rates will drop further this year as more hotels are finished, adding to the existing room supply of around 60,000.
“The increase in the number of hotels that is coming up, the hunger that every hotel has to get (a decent) occupancy rate is just driving everybody down,” he said.
“Ultimately we will see rates come down further … we are now starting to see realistic rates in Dubai.”
The Rose Rayhaan opens is a four-star hotel, but Kaddouri said there are plans to upgrade the hotel to five-star by the beginning of next year.
Kaddouri said the Rose Rayhaan is the 11th hotel that Rotana operates in the UAE.
He said Rotana is pushing ahead with expansion despite the industry downturn and plans to expand its portfolio to 100 hotels by 2015 and be present in every major city in the Middle East and North Africa (MENA).
Rotana currently operates 70 hotels across the MENA region.
