Dubai hotel operators anticipate 18-24 months to pre-pandemic profitability levels
Dubai’s real estate market sales are surviving the current economic crisis relatively well, according to a new KPMG report, which analyses the prospects for Dubai’s real estate and hospitality sectors in the wake of COVID-19.
According to the report, Dubai’s real estate sector is facing significant challenges in the current environment. While demand may be temporarily saturated, government and industry stakeholder incentives are keeping investors engaged and many developers intend to continue projects as originally planned.
Prices are expected to remain soft through 2020 due to COVID-19, with Dubai remaining a buyers’ and renters’ market. Despite transactions being disrupted at the end of Q1 2020, attractive prices and terms may prompt residents and stakeholders to explore investment opportunities. Future handovers, however, may be impacted by the duration of the pandemic, buyer sentiment, easing of restrictions and supply chain issues.
Sidharth Mehta, Partner, Head of Building, Construction and Real Estate at KPMG Lower Gulf, says: “As Dubai’s economy gradually reopens, the emirate’s world class infrastructure and emphasis on innovation is likely to place it in a relatively strong position with investors and consumers, and may strengthen business confidence. We can expect Dubai’s real estate and hospitality sectors to remain resilient and continue to play a critical part in the nation’s economic growth.”
The report also analyzes the performance of Dubai’s hospitality sector, a mainstay of its non-oil economy, largely fueled by international tourism. Travel restrictions shrunk average occupancy in May to 27.7%, a year-on-year decline of 46.1%. With recovery dependent upon international and local travel restrictions and traveler sentiment, Dubai hotel operators believe their FY 2020 revenue may contract by more than 50% and anticipate it will take 18-24 months to reach pre-pandemic levels of profitability.
The KPMG report states the UAE’s brick-and-mortar retail, especially malls, were directly impacted by the pandemic – particularly food and beverage (F&B) outlets, high-end retailers and entertainment venues.
Businesses that successfully adopted e-commerce options are staying connected to their consumer base, with grocery stores and pharmacies witnessing an uptick in online sales. Companies which had not previously invested in technology are forced by the pandemic to re-evaluate their IT strategy. Digital transformation does not seem to be an option – it has become a critical business need.
Certain segments, such as tourism, aviation and retail, are expected to recover at a slower pace than others. By the end of 2022, however, KPMG anticipates industries to return to pre-COVID-19 levels of activity.
