Supply outpacing demand for Abu Dhabi hotels

An oversupply of hotel rooms in Abu Dhabi is expected to reduce soft occupancy rates even further in the Gulf emirate during the next two years, a report said on Sunday.

"Occupancy is expected to further soften with additional hotel openings planned over the next two years," property consultancy Jones Lang Lasalle said in its quarterly report on Abu Dhabi real estate.

Nearly 6,700 additional rooms were expected to enter the market by the end of 2012, 75 percent up from 2009.

Some 3,200 hotel rooms came onto the market in 2009, and an additional 1,500 were expected to be available this year.

The report said occupancy rates for "quality hotels" declined to 56 percent in the first seven months of this year, compared with 78 percent in the corresponding period last year.

But it pointed out established hotels in the city and business locations "remained solid", while newly opened hotels in developing areas like Yas Island, which hosts a Formula One circuit, were experiencing lower occupancies.

The increase in supply has put pressure on hotel room rates which is going through a "sharp decline", it said.

The average daily rate has dropped 34 percent in the first seven month of 2010 to 750 dirhams (204 dollars), compared with 1,140 dirhams in the same period last year.

Abu Dhabi, which controls the bulk of the oil wealth of the United Arab Emirates, is vying to establish itself as a tourism destination, developing new hotels and theme parks, in addition to branches of several international museums.