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UAE Hospitality Industry: Performance and Outlook (2015–2029)

  • Writer: MMCG
    MMCG
  • Jul 1
  • 31 min read
Louvre Abu Dhabi - Saadiyat - Abu Dhabi - United Arab Emirates Photo by Michal Mohelsky
Louvre Abu Dhabi - Saadiyat - Abu Dhabi - United Arab Emirates Photo by Michal Mohelsky

Executive Summary

  • Robust Recovery: The UAE hotel industry has rebounded strongly from the pandemic, with occupancies reaching ~79% in the past year – exceeding pre-2019 levels (which were ~73% in 2019). Average daily rates (ADR) have also surged from their 2020 lows, driving RevPAR (revenue per available room) back near mid-2010s peak levels (2024 RevPAR of $138 vs. $141 in 2015).


  • Segment Divergence: Performance varies by class. Luxury & Upper Upscale hotels achieve the highest rates (ADR ~$286) but with lower occupancy (76%), whereas Midscale & Economy hotels run at higher occupancy (~83%) albeit with much lower ADR ($70). Upscale & Upper Midscale properties sit in between (occupancy ~81%, ADR ~$106). All segments saw demand recovery, but luxury hotels led in occupancy growth in 2024 (+4.1% points) while economy hotels led ADR growth off a low base.


  • Regional Leaders: Dubai dominates the UAE market with ~71% of rooms and leads in ADR ($193) and RevPAR ($154). Abu Dhabi slightly tops occupancy at 79.7% (vs. 79.6% Dubai) and saw the fastest ADR growth (+19.8% YoY) in the last year. Provincial/emerging emirates trail in absolute performance (RevPAR ~$96) but are growing, with RevPAR up +10.6% YoY – higher growth than Dubai’s +4.2%.


  • Historic Trends: From 2015–2019, rapid supply growth (5–7% annually) outpaced demand and pushed ADR down ~28% (2015–2019). The pandemic caused an unprecedented demand shock in 2020 (occupancy fell to 51%, RevPAR –41%). However, 2021–2024 saw a V-shaped recovery: demand roared back (+43% in 2021, +15.6% in 2022) while new supply additions slowed, lifting occupancy to record highs by 2024. ADR has also rebounded (UAE-wide ADR $178 in 2024, +30% vs 2019), though still slightly below 2015’s level in nominal terms.


  • Forecast Outlook (2025–2029): Looking ahead, occupancy is expected to stabilize in the mid-70s% through 2029 as a new supply wave enters. ~16,000 rooms are under construction (≈7% of existing stock), which will gradually push supply growth back up (estimated ~3% CAGR). Demand is projected to continue growing (~2–4% annually) supported by government tourism initiatives and economic growth, but not quite at the breakneck post-pandemic pace. As a result, occupancy may ease slightly from ~80% in 2025 toward ~75% by 2029 – remaining healthy by global standards. ADR is forecast to rise modestly (low single-digit growth per year), likely reaching the $200+ range by 2029, as the market digests new upscale supply and hoteliers emphasize rate over volume. Consequently, RevPAR is expected to surpass pre-pandemic peaks, climbing into the mid-$150s by 2029 (from ~$146 in mid-2025) – a moderate growth trajectory after the post-2020 surge.


  • Profitability & EBITDA: UAE full-service hotels (predominantly upscale and luxury) have restored strong profitability. In 2023, Gross Operating Profit (GOP) margins hit 44.2% and EBITDA margins ~36.7%, up ~1–2 points from 2022. Room revenues, which make up ~63% of total revenue, are extremely high-margin (rooms department costs only ~18% of room revenue). Food & beverage contributes ~31% of revenue but runs at higher cost (~59% of F&B revenue in expenses). Efficient cost control (including labor at 21% of revenue) and minimal taxation have enabled EBITDA per room to grow +13% in 2023. The outlook is for sustained profitability: as revenues grow, economies of scale and cost discipline are expected to keep EBITDA margins in the mid-30s%.


  • Competitive Benchmarking: Dubai and Abu Dhabi are neck-and-neck on occupancy (~80%), but Dubai’s higher ADR gives it the top RevPAR. Among chain segments, Luxury/Upscale hotels command RevPAR ~$206–218 (12-mo basis) versus Midscale/Economy at ~$58, reflecting the huge rate premium at the high end. Abu Dhabi’s recent performance surge (RevPAR +26% YoY) has narrowed the gap with Dubai, highlighting competitive gains. Going forward, we expect Dubai to maintain a RevPAR premium due to its global hub status, while Abu Dhabi and other emirates compete by targeting niche segments, events, and value propositions to boost occupancy.


  • Investment & Development: Hotel development activity is on the upswing, concentrated in Dubai and emerging emirates. After a low-supply 2023–24 (only +0.4% net new supply in 2024), ~3,600 rooms were delivered in the last 12 months and a further 15,993 rooms are under construction. Notably, provincial markets have the highest pipeline relative to their size (pipeline ≈13% of existing rooms), as destinations like Ras Al Khaimah and Sharjah ramp up development. Dubai also continues to expand (~11,100 rooms U/C, ~7% of stock), while Abu Dhabi’s pipeline is modest (~830 rooms, 2.7% of stock). On the investment front, hotel transaction volumes remain limited – only 2 major hotel deals were recorded in H1 2025 (total $463M), after 2 deals in 2023 ($218M). When assets do trade, pricing is high: recent transactions averaged $0.7M+ per room in 2025 and even higher in 2023 (>$1.6M/room on average, likely luxury assets). Cap rates are not formally tracked in the data (insufficient sample), but implied yields are relatively low – in the mid-single-digits – reflecting investor confidence in the UAE’s growth and a prevalence of long-term strategic owners. Outlook for investment is positive but selective: robust tourism fundamentals and upcoming supply additions may present opportunities, yet many assets remain tightly held by government and family conglomerates, meaning deal flow will likely stay gradual.


Segment Performance by Class

The UAE hotel market can be segmented into three broad classes for performance analysis: Luxury & Upper Upscale, Upscale & Upper Midscale, and Midscale & Economy. Each segment exhibits distinct trends in occupancy, pricing, and growth:

  • Luxury & Upper Upscale: This segment (5-star and top-tier 4-star properties) accounts for the largest share of room supply (~91,000 rooms, ~43% of total). Luxury hotels command by far the highest room rates – the 12-month average ADR is ~$286 – but run lower occupancy levels than other classes (recent occupancy ~76%). As a result, RevPAR for luxury/upper-upscale hotels is about $218, the highest of any class by a wide margin. Historically, this segment faced rate pressure in the mid-2010s due to new high-end supply and competition: luxury ADR dropped from ~$260 in 2015 to ~$202 by 2019. Occupancy also softened slightly pre-2020 (hovering in the ~71–74% range). During the pandemic, luxury hotels were hit hard (2020 occupancy plunged to 46%) but also rebounded strongly thanks to pent-up premium travel demand. By 2023, luxury ADR had not only recovered but exceeded 2015 levels, reaching ~$273 (vs. $260 in 2015). Occupancy climbed back to 72% in 2023 and ~74.5% in 2024. Recent growth has been driven by a focus on rate yield management: in 2024 luxury ADR was up only +0.9%, but occupancy jumped +4.1% points, lifting RevPAR +5%. We expect luxury hotels to continue leveraging their pricing power – ADR is projected to rise modestly in the coming years – but occupancy may remain in the mid-70s as substantial new luxury supply (e.g. resorts and upscale projects in Dubai) enters the market.


  • Upscale & Upper Midscale: This mid-tier segment (~87,000 rooms, ~41% of supply) includes 3- and 4-star properties and is the backbone of corporate and package tourism. These hotels currently achieve the highest occupancy levels (≈81–84%) in the UAE, reflecting strong demand from cost-conscious travelers and groups. The trade-off is significantly lower room rates: the ADR averages ~$106 – roughly one-third of luxury rates. Recent performance has been robust; Upscale/Upper Midscale RevPAR is ~$86 (12-mo trailing), and grew ~3.9% in 2024. Notably, this segment had faced severe ADR compression prior to 2020: the average ADR fell from ~$123 in 2015 to just ~$82 by 2019 as an influx of mid-market hotels (often encouraged by government to broaden tourist base) drove price competition. During COVID, mid-tier ADR dropped further to ~$66 in 2020. The recovery has been encouraging – ADR bounced back to ~$100 by 2023 – but ADR remains ~15–20% below the mid-2010s peak. Occupancy, on the other hand, has fully recovered and hit 80% in 2024, the highest in a decade. Looking ahead, we anticipate upscale hotels will maintain high occupancies (~80%+), but ADR growth will be moderate as this segment remains price-sensitive. Continued expansion of budget airlines, group tours, and exhibitions will fuel demand, but the ample pipeline of new mid-market properties (over 4,500 rooms under construction in this class) will keep competitive pressure on rates.


  • Midscale & Economy: Comprising budget hotels and inns (~36,000 rooms, ~17% of supply), this segment has the lowest ADR (~$70) but surprisingly high occupancy (recently 83%, highest of all segments). The ability to fill rooms reflects strong demand from price-sensitive travelers, domestic guests, and long-stay corporate bookings. Before the pandemic, economy hotels also struggled with rate dilution – ADR slid from ~$89 in 2015 to ~$56 in 2019 as many new limited-service hotels opened and Airbnb provided alternative low-cost options. During 2020, occupancy fell to ~60% and ADR to ~$43. Recovery has been swift: by 2023 ADR was ~$66 (+8.4% YoY) and occupancy 81%. As of 2024, Midscale/Economy RevPAR is about $56–58, slightly above 2019 levels – marking a full rebound. In fact, this segment’s occupancy is now well above pre-2018 norms (which were ~76–77%), indicating a structural increase in budget travel demand post-COVID. We expect midscale hotels to continue achieving high occupancy into the forecast period (perhaps in the low-80s%) as they absorb demand overflow from higher segments during peak periods. ADR growth, however, will likely be limited to inflationary levels, given intense competition. By 2029, economy ADR may approach the mid-$70s, with RevPAR in the mid-$60s, assuming no major shocks.


Overall, the segmentation reveals a classic trade-off: the higher-end hotels drive rate while lower-tier hotels drive volume. This pattern is expected to persist. All segments are forecast to see relatively stable or slight growth in RevPAR through 2029, with luxury hotels benefitting from rate gains and lower segments from incremental occupancy gains (until new supply again tests their occupancy limits).


Abu Dhabi: Sheikh Zayed Grand Mosque - Photo by Michal Mohelsky
Abu Dhabi: Sheikh Zayed Grand Mosque - Photo by Michal Mohelsky

Regional Performance and Comparison (Dubai, Abu Dhabi, Provincial UAE)

The UAE’s hospitality market is geographically concentrated, with Dubai as the flagship, Abu Dhabi as a strong secondary hub, and other emirates (collectively “Provincial UAE”) forming a third tier. Each region exhibits differing performance dynamics:

  • Dubai: Dubai is the largest hotel market in the UAE by far – it represents 71% of the nation’s hotel rooms(152,131 rooms) and a similar share of demand. Renowned as a global tourism and business destination, Dubai achieves high absolute performance metrics. Over the 12 months through mid-2025, Dubai’s occupancy averaged 79.6%, virtually tied for first place. ADR in Dubai is the highest in the country at $193.51, reflecting its many luxury resorts and 5-star city hotels, as well as sustained demand. These factors give Dubai the top RevPAR at $154, slightly above Abu Dhabi. However, growth in the latest period was modest: RevPAR rose only +4.2% YoY, as occupancy gains slowed to +2.9% and ADR was nearly flat (+1.3%). This hints that Dubai’s post-pandemic recovery had largely matured by 2024. Historically, Dubai’s occupancy has hovered in the high-70s (%) in good years, dipping during oversupply bouts. Notably, in 2019 (pre-COVID), occupancy was ~78% and ADR ~$180 (in USD terms), after several years of softening. Dubai’s swift recovery to near 80% occupancy by 2022–2023, and ADR surpassing pre-2019 levels, underscores its resilience. Looking ahead, Dubai is expected to sustain high occupancy (~77–80%) given its strong event calendar, air connectivity, and marketing, but new supply (over 11,000 rooms under construction) will need to be absorbed. We anticipate Dubai’s RevPAR to grow at a low-single-digit pace through 2029 – maintaining its UAE lead, but with smaller percentage gains as the market is already relatively mature. Key to watch will be Dubai’s ability to continue increasing rates through premium offerings (e.g. ultra-luxury resorts, new attractions) to offset periods of supply growth.


  • Abu Dhabi: The capital city is the second-largest market with ~31,100 rooms (14.5% of UAE supply). Abu Dhabi’s hospitality recovery gained remarkable momentum recently. Its current occupancy stands at 79.7%, effectively equal first with Dubai. ADR, at $183.66, now nearly matches Dubai’s, and notably jumped ~+20% in the last year – by far the largest rate increase in the UAE. This drove an impressive RevPAR growth of +26.3% YoY (RevPAR now ~$146). Several factors aided Abu Dhabi’s surge: the return of government and corporate business travel, a series of high-profile events (e.g. Abu Dhabi Grand Prix, conferences), and limited new supply in 2023–24. In fact, Abu Dhabi’s room supply grew just ~1% in the past year, and with only 830 rooms (2.7% of inventory) under construction, supply pressure is minimal in the near term. Historically, Abu Dhabi has lagged Dubai on occupancy (often in the mid-60s% in the mid-2010s) due to a smaller leisure sector and past oversupply. The current ~80% occupancy is a record high, indicating a structural improvement as the emirate diversifies its demand (leisure tourism, cultural attractions like Louvre Abu Dhabi, etc.). For the forecast, Abu Dhabi is poised to remain at high occupancy (~75–78%) and could even outpace Dubai on this metric if it continues to limit new hotel development. We expect ADR to normalize upward gradually (the recent 20% jump may not repeat annually), possibly approaching ~$200 by 2029, which would keep Abu Dhabi’s RevPAR in the $150+ range. The key challenge will be sustaining growth: with fewer new rooms, Abu Dhabi must stimulate demand (international visitation, MICE events) to avoid stagnation. But overall, the outlook is positive – Abu Dhabi is narrowing the gap with Dubai and will continue to serve as a high-yield market with slightly lower volume but nearly as high rates.


  • UAE Provincial Markets: This category covers all other emirates (Sharjah, Ras Al Khaimah (RAK), Ajman, Fujairah, Umm Al Quwain) and smaller regional markets. Collectively they comprise ~30,600 rooms (14.3% of UAE supply), roughly equal in size to Abu Dhabi’s inventory. Performance in these markets is more varied and generally lower than the big two cities. Combined, the provincial markets had an occupancy of 73.6% and ADR of $130.50, yielding a RevPAR of $96.01 over the last 12 months. This is about 60% of Dubai’s RevPAR level – a substantial gap, albeit expected given the predominance of midscale beach resorts and fewer 5-star flags in these areas. Year-on-year growth has been solid: provincial RevPAR rose +10.6% on the back of ADR gains (+9.4%) and a small occupancy uptick (+1.2%). Within this category, certain markets stand out – e.g. Ras Al Khaimah has been aggressively developing as a tourism destination (adventure and leisure focus), and saw significant ADR growth especially when it hosted high-profile events or holidays Sharjah and Ajman cater more to regional and budget travelers; their occupancy is decent but ADR is much lower than Dubai/Abu Dhabi (often quoted in AED terms around a few hundred dirhams). The pipeline in provincial markets is relatively large: ~4,049 rooms are under construction, equating to 13.2% of existing stock – the highest supply growth potential of any region. Notably, RAK has a mega-project (multibillion-dollar resort) underway, and Sharjah continues to add midmarket hotels. This implies that provincial markets could face occupancy pressure in coming years if demand doesn’t accelerate correspondingly. We project provincial occupancy will likely settle in the low 70s% as new supply opens, with RevPAR gradually improving to around $100–110 by 2029 driven by ADR increases (assuming these markets succeed in moving slightly upscale and attracting more international tourists). The competitive positioning of the provincial emirates will hinge on niche differentiation – e.g. eco-tourism, cultural festivals, or even gaming (RAK’s upcoming integrated resort) – to draw visitors in addition to the traditional sun-and-sea value segment.


To summarize the regional competitive landscape: Dubai remains the benchmark for high-rate, high-volume performance, Abu Dhabi is a rising challenger focusing on yield and selective growth, and the other emirates are growing from a smaller base with opportunities in specific segments. The latest rankings illustrate this clearly, as shown below:


Performance by Region (12 months ending Q2 2025):

  • Dubai: 79.6% Occupancy; $193.5 ADR; $154 RevPAR (YoY RevPAR +4.2%)

  • Abu Dhabi: 79.7% Occupancy; $183.7 ADR; $146 RevPAR (YoY RevPAR +26.3%)

  • UAE Provincial: 73.6% Occupancy; $130.5 ADR; $96 RevPAR (YoY RevPAR +10.6%)

While Dubai leads in absolute RevPAR, Abu Dhabi’s gap has closed significantly (only ~$8 difference) as of 2024. We expect Dubai to retain a RevPAR premium through 2029, but Abu Dhabi will likely continue to compete closely on occupancy and could surpass Dubai on that metric in some years if it keeps supply in check. The provincial markets will remain ranked third, but with potential to improve their RevPAR ranking if high growth continues (for instance, an emirate like RAK could overtake the others in ADR with its new luxury offerings).


Historical Trends (2015–2024)

The UAE hospitality industry experienced a turbulent yet ultimately resilient trajectory over the past decade. Key phases include a supply-driven softening from 2015 to 2019, an abrupt pandemic-related collapse in 2020, and a vigorous recovery from 2021 to 2024:


  • Boom and Oversupply (2015–2019): In the mid-2010s, the UAE – particularly Dubai – was in an expansionary phase following the announcement of Dubai’s Expo 2020 and generally bullish tourism growth. Room supply grew rapidly each year (e.g. +5.2% in 2015, +6.5% in 2019). Demand growth, while strong (3–6% annually in that period), did not keep pace, resulting in a gradual decline in occupancy from ~74.7% in 2015 to ~73.0% in 2019. Industry RevPAR correspondingly drifted downward. As shown in the chart above, ADR fell sharply during these years – from ~$188 in 2015 to ~$137 by 2019 – reflecting increased competition and discounting. Notably, 2015 appears to have been a high-water mark for rates (helped by a weaker US dollar then, and strong demand around that time), after which an influx of new hotels (especially midscale hotels and new resorts) drove a supply glut. By 2018–2019, many operators cut rates to defend occupancy, leading to countrywide ADR declines in the high-single to double digits each year. Despite healthy visitor growth, the sheer volume of new rooms (e.g. Dubai alone added ~20,000 rooms from 2015 to 2019) diluted performance. By the end of 2019, RevPAR had eroded to ~$100 (down ~30% from 2015’s ~$141), and profitability was under strain. In essence, the industry was already in a downcycle entering 2020, due to oversupply and global economic softening in late 2019.


  • Pandemic Shock (2020): The COVID-19 pandemic dealt an unprecedented blow in 2020. International travel nearly halted for several months. UAE hotels saw demand (occupied room-nights) plunge by -32% in 2020 (after years of growth), far outpacing the slight -3.9% reduction in supply (some hotels closed temporarily). Nationwide occupancy averaged just 51.4% in 2020, essentially dropping 20+ points from the prior year’s ~73%. ADR fell ~17% to $114, as hotels that remained open slashed rates or repurposed for quarantine uses. RevPAR cratered by -41% in one year, hitting just $58 – the lowest level in modern record. This period saw massive losses and cash burn; many hotels furloughed staff, and development projects paused. However, UAE authorities were relatively swift to reopen by mid-2020 with safety measures, setting the stage for an earlier recovery than some regions.


  • Rapid Recovery (2021–2022): The UAE’s hospitality recovery began in late 2020 and accelerated in 2021 and 2022. Dubai’s hosting of Expo 2020 (which took place Oct 2021–Mar 2022) was a catalytic event that drew millions of visitors, and generally the UAE benefited from being perceived as a safe, open destination when others remained closed. Hotel demand surged by +43% in 2021 and another +15.6% in 2022. This far outstripped supply growth (which was +11.8% in 2021 as delayed hotels opened, then +7.0% in 2022). The net effect was occupancy bouncing back to ~65.8% in 2021 and 71.1% in 2022 – a dramatic rebound. ADR also jumped, especially in 2022: from the lows of $114 in 2020, ADR recovered to ~$144 in 2021 and then soared 18% in 2022 to $169.98. Part of the ADR increase was due to a shift back to higher-rated segments (luxury hotels reopening, international guests returning) and general inflationary pricing. By the end of 2022, RevPAR had reached $120.86, doubling from 2020 levels. Notably, 2022 RevPAR was only ~15% below the 2015 peak – a remarkable comeback in two years. The industry benefitted from effective government stimulus, marketing (campaigns like “Dubai Open for Tourism”), and the inherent appeal of UAE’s outdoor and resort offerings which were in demand during the pandemic recovery phase.


  • Full Recovery and Expansion (2023–2024): In 2023, the UAE not only recovered but began entering a new expansion cycle. Occupancy averaged 75.8% in 2023 – above the long-term historical average (71%) and just shy of the mid-decade highs. By 2024, occupancy further climbed to 77.6%, the highest level in at least a decade, thanks to stable supply and growing demand. ADR continued its upward trajectory, reaching $178 in 2024 (up 2.6% YoY). This is only 5% below the all-time high seen in 2015, indicating that the rate depression of late 2010s has been largely reversed. The combination of near-record occupancy and high ADR meant 2024 RevPAR hit $138.37, essentially back to parity with 2015’s $140.80. In other words, by 2024 the UAE hotel industry had fully regained its peak performance in nominal terms – a situation few global markets achieved so quickly post-pandemic. Importantly, this RevPAR recovery was driven more by occupancy gains (as hotels refilled rooms) in 2021–2023, and then by balanced growth in 2024. The supply side also contributed: supply growth slowed to just +0.4% in 2024, as many projects slated for 2023/24 were deferred or phased. This lack of new rooms, combined with continued demand growth (+2.8% in 2024), created a favorable occupancy spike and allowed hoteliers to be more aggressive on rates. By mid-2025, trailing RevPAR was even higher ($147), reflecting a strong winter 2024–25 season.


In summary, the UAE hotel sector’s historical trend can be characterized as high growth and volatility: a mid-2010s surge and slump, a 2020 crash, and a swift rebound to prior highs by 2024. This sets the stage for the next phase, where the challenge will be managing a new cycle of supply growth without repeating the oversupply of the last decade.


Forecast 2025–2029 Outlook (Occupancy, ADR, RevPAR, Supply, Demand)

Looking forward, the UAE hospitality market faces a period of expansion tempered by lessons from the past. The 2025–2029 forecast anticipates continued growth in both demand and supply, with performance metrics stabilizing at high levels rather than rising unabated. Our outlook for the key indicators is as follows:


  • Supply & Demand: After the pandemic hiatus, development activity is rebounding. The current development pipeline (15,993 rooms under construction) suggests that supply will grow meaningfully through 2029. We project approximately +3% supply growth per year on average (though front-loaded in 2025–2027 as many projects complete). This translates to the UAE’s available rooms increasing from ~77 million room-nights in 2024 to roughly ~90 million by 2029 (c.+16% cumulative increase). Demand growth is expected to be slightly lower, in the range of ~2–3% annually after 2025 – largely tracking economic and tourism market growth. The UAE government’s ambitious Tourism Strategy 2031 (aiming to boost annual visitors and tourism GDP) will support demand through new attractions, easing of travel visas, and marketing. Key demand drivers include: increasing international tourist arrivals (especially from Asia and Europe), growth in business travel/exhibitions, and population growth fueling domestic staycations. By 2029, annual occupied room-nights could reach ~67–70 million (up from ~59.7 million in 2024, a ~15–17% rise). This implies demand CAGR ~2.8%, slightly below supply CAGR. Thus, the market will likely return to a mild oversupply situation toward the end of the decade – though nothing as severe as the mid-2010s glut. One mitigating factor: if some planned projects do not proceed (a plausible scenario if global economy weakens), supply growth could be lower, allowing occupancy to run higher than forecast. Our base case assumes most current projects do open by 2027, with fewer new starts thereafter.


  • Occupancy: Given the above supply-demand balance, we expect occupancy to peak in 2025 or 2026 (around ~78–80% nationally) and then moderate slightly. After 2026, as new rooms come on line in bulk (e.g. Dubai mega-projects, resort openings in RAK, etc.), occupancy may slip a few points if demand growth doesn’t keep up annually. By 2029, we forecast overall occupancy in the mid-70s (%), roughly 74–76% range. This would still be higher than the 71% long-term average, indicating a structurally tighter market than the pre-COVID era, but a bit lower than the unsustainably high 77–80% seen in 2024–2025. In practice, an occupancy in the mid-70s is very healthy and leaves room for hoteliers to push rate. It also reflects a more normalized environment with slightly more vacancy as new supply is absorbed. Regionally, Dubai and Abu Dhabi may dip closer to 75% by 2029 (from ~80% now) as they lead supply growth, whereas some provincial markets could hold steady in the low 70s if their growth is matched by new demand generators. The occupancy outlook can be summarized as plateauing then slight easing, with seasonality continuing (peak winter months will still see 85%+ in Dubai, for instance, even if annual average is 75%).


  • ADR: We anticipate average daily rate to continue rising in nominal terms through 2029, but at a much more moderate pace than the volatile swings of the last few years. Inflationary pressures (global and local) will provide a floor for ADR growth (e.g. 2–3% per year just to keep real rates flat). Additionally, the quality of new supply is generally high – many forthcoming hotels are upscale or luxury, which will lift the overall average rate mix. Balancing this, competition – especially in the mid-market and upscale tiers – will cap how much hotels can increase rates without risking occupancy. Considering these factors, we project ADR to grow around 2–4% annually over 2025–2029. From a base of ~$186 (the 2024 average ADR), this would put UAE-wide ADR around $210–$220 by 2029. This trajectory means that by 2027 or 2028, ADR in nominal terms will likely set new record highs for the UAE (surpassing the previous peak from mid-2010s). It’s worth noting that ADR growth may be front-loaded in the forecast period – with 2025 possibly seeing above-trend rate gains if demand remains hot and supply is still ramping up slowly. Indeed, early 2025 data (YTD) already showed ADR over $200 due to a strong events calendar. However, as more rooms open, rate competition could intensify, hence our tempered growth assumption. By segment, luxury hotels should be able to increase ADR a bit faster (perhaps ~3–5% annually, given their differentiated product and high-spending clientele), whereas midscale/economy hotels may grow closer to inflation (~1–3% annually) given price-sensitive demand. If global economic conditions remain favorable and the UAE’s positioning as a premium destination strengthens (e.g. via new attractions like mega theme parks, cultural sites), there is upside for ADR to exceed our baseline forecast.


  • RevPAR: Revenue per available room, being the product of occupancy and ADR, is expected to see steady but unspectacular growth in the coming years. After the huge post-COVID jump (RevPAR +27% in 2022, +9% in 2023), the growth rates will normalize. For 2025, we anticipate RevPAR growth in the low-to-mid single digits (since 2024 was already high and some occupancy softness might emerge late 2025). From 2026 onward, RevPAR could grow ~3% annually on average, largely driven by ADR gains, with minor occupancy drag. By 2029, our projection puts UAE overall RevPAR in the mid-$150s (USD), up from ~$138 in 2024 – roughly a 2% CAGR over 5 years. This implies that in real terms (adjusting for inflation) RevPAR will be relatively flat, which is not unusual for a maturing market. Importantly, this level of RevPAR would be an all-time high for the UAE in nominal terms, reflecting the industry’s full post-pandemic recovery and moderate expansion. Of course, there are risks and variables: a global recession could curtail demand and push hotels into rate discounting (downside risk to RevPAR), whereas an unexpected boom (or a major event like another World Expo or large sporting event win) could boost demand above forecast (upside risk). Barring such surprises, a reasonable forecast scenario is steady incremental RevPAR growth, maintaining the UAE’s status as the Middle East’s top-performing hotel market but without the extreme spikes of the early 2020s.


In summary, the 2025–2029 outlook is positive yet cautious. The industry will transition from the rapid recovery phase to a more mature growth phase. Occupancy will likely settle slightly lower than the recent peak, but still robust. ADR will climb gradually, pushing RevPAR to new highs by the end of the decade. The primary challenges will be managing new supply (to avoid a repeat of pre-2020 oversupply) and sustaining demand growth through continual destination marketing and experience enhancement. Given current data and pipeline trends, the UAE market appears well-positioned to navigate this balancing act, supported by proactive planning and investment in tourism by both public and private sectors.


Profitability Drivers and Expense Composition (Full-Service Hotels)

A critical aspect of the hotel industry’s health is profitability – not just top-line metrics. The UAE’s full-service hotels (generally 4-star and 5-star properties with multiple amenities) have seen their profitability rebound alongside RevPAR. CoStar’s hospitality report provides a detailed breakdown for 2023 full-service hotel financial performance, which offers insight into revenue and cost structures:


  • Revenue Mix: UAE full-service hotels derive the majority of revenue from room rentals. In 2023, room revenue contributed ~62.9% of total revenue. The second-largest source is food & beverage (F&B) operations – including restaurants, bars, and banqueting – which combined (food, beverage, and minor other F&B) accounted for roughly 31.5% of total revenue (20.5% food, 6.8% beverage, 4.2% other F&B). Other departments (such as spa, laundry, parking, etc.) and miscellaneous income make up the remaining ~5–6%. This breakdown underscores that UAE hotels, especially at the high end, are reliant on rooms for the bulk of income, but F&B is also a significant component (more so than in limited-service hotels). Many UAE hotels operate as destination resorts or city hotels with extensive F&B outlets, so capturing dining and event spend is a key part of the business model.


  • Departmental Profit Margins: The profitability of these revenue streams varies widely. Rooms department is extremely high-margin: in 2023, rooms expenses were only 18.4% of rooms revenue, implying an ~81.6% gross margin on the room revenues. This reflects relatively fixed room operating costs and the high pricing power in this market segment. In contrast, Food & Beverage operations are far more cost-intensive. The combined F&B departmental expenses amounted to 58.6% of F&B revenue, leaving roughly a 41% margin for F&B. This aligns with global norms – food and beverage service has costs of goods, kitchen payroll, etc., that significantly eat into revenue. Other minor departments had even slimmer margins (in fact, “Other Departments” expenses were 86.1% of their revenue, meaning only ~14% margin – many of these ancillary services operate at break-even or are offered for guest experience rather than profit). The implication is that the Rooms department is the engine of profitability, subsidizing other offerings. UAE hotels benefit from high room rate strategy which drives that room margin.


  • Undistributed Operating Expenses: After departmental profits are calculated, hotels must cover undistributed overheads. In 2023, UAE full-service hotels spent significant sums on Administration & General (7.7% of total revenue), Sales & Marketing (4.9%), Property Operations & Maintenance (3.6%), Utilities (5.8%), and Information Systems (1.5%), among other costs. Cumulatively, these overheads (excluding management fees, rent, etc.) represent roughly 23%–24% of total revenue in 2023 (summing the listed percentages). Notably, labor costs are a substantial component embedded within those expenses: total labor across all departments was 21.3% of revenue. The UAE’s labor cost percentage is relatively low compared to some Western markets (where it often exceeds 30%), thanks in part to favorable labor supply and lower wages for certain service positions, as well as efficiencies gained in recent years.


  • GOP and EBITDA: After accounting for departmental and undistributed operating expenses, Gross Operating Profit (GOP) in 2023 was 44.2% of revenue. This is a high GOP margin by international standards (40%+ GOP is generally considered strong in hospitality) and reflects the aforementioned high room margins and relatively low fixed cost burden (for example, properties in the UAE have minimal property tax – effectively 0% of revenue – which is a significant advantage). From GOP, the remaining deductions are management fees (often a percentage of revenue or profit), any rent, and insurance. In 2023, management fees were 4.5% of revenue and insurance only 0.3%, plus negligible property taxes. After these, the resulting EBITDA (Earnings Before Interest, Taxes, Depreciation, Amortization) was 36.7% of total revenue for full-service hotels. In absolute terms, that equated to $34,095 EBITDA per available room (per key) for the year. This EBITDA margin is robust and improved from the prior year – EBITDA per key grew +13.0% in 2023 vs 2022, outpacing revenue growth of +8.9%, meaning operating leverage was achieved. The margin expansion (EBITDA margin up roughly 1–1.5 percentage points year-on-year) came as hotels managed to increase revenues faster than costs, aided by efficiencies and cost containment post-COVID.


  • Profitability Outlook: We expect UAE hotel profitability to remain strong through 2029. As occupancy and ADR stabilize at high levels, hotels will focus on optimizing expenses and maximizing ancillary revenue. Some trends to note: energy efficiency initiatives could reduce utility cost percentages (already, utilities were a manageable 5.8% of revenue in 2023, down from prior years). Technology and automation may keep admin costs in check. However, labor costs could rise moderately as labor markets tighten and hotels strive to improve service quality – but given a largely expatriate workforce model, we project labor as a % of revenue will stay around 20–22%. Overall, if ADR grows as forecast and occupancy holds, total revenue per available room will increase, likely improving GOP dollars per room. Margins might see slight compression if costs inflate (particularly wages or if new hotels ramp up with initial inefficiencies), but we expect EBITDA margins to remain in the mid-30s% range. Full-service hotels in UAE should continue to generate ~35% of revenue as profit, which is attractive by global comparison. Key profitability drivers to monitor will be the proportion of revenue from high-margin rooms vs. lower-margin F&B – with more limited-service properties and outsourced restaurant operations in new hotels, some owners may improve overall profit mix. Also, the low tax/regulatory cost environment (no VAT on many tourism services, etc.) in UAE bolsters net margins and is not expected to change dramatically in the near term.


In summary, UAE full-service hotels enjoy a favorable profit profile, underpinned by high room rates and relatively controlled costs. The pandemic forced hoteliers to streamline operations (e.g., leaner staffing, renegotiated supplier contracts), and those efficiency gains have carried forward. Barring any major changes (like new taxes or labor cost surges), the hospitality sector’s profitability is positioned to remain healthy, supporting continued investment in the industry.


Competitive Benchmarking: Regions and Classes

To evaluate competitive position, we can benchmark performance across regions (major markets) and across hotel classes. Below we present a concise ranking of key metrics:

Regional Ranking (2024 performance):

  • Occupancy: 1) Abu Dhabi – 79.7%; 2) Dubai – 79.6%; 3) UAE Provincial – 73.6%. Abu Dhabi just edges Dubai for the top occupancy, a notable change as historically Dubai led – reflecting Abu Dhabi’s surge in demand and constrained supply.

  • ADR: 1) Dubai – $193.51; 2) Abu Dhabi – $183.66; 3) Provincial – $130.50. Dubai maintains the highest rates given its luxury mix and global city status. Abu Dhabi’s rates have climbed and are now only ~5% lower than Dubai’s on average, while provincial markets lag significantly, underscoring their midscale orientation.

  • RevPAR: 1) Dubai – $154.04; 2) Abu Dhabi – $146.46; 3) Provincial – $96.01. Dubai retains the top spot in revenue per available room, though Abu Dhabi is close behind (within ~$8, as discussed). Both far exceed the provincial markets’ RevPAR. The gap between rank 2 and 3 is large – emphasizing that Dubai and Abu Dhabi outperform smaller emirates by ~50% in RevPAR. However, growth rates in 2024 favored Abu Dhabi and Provincial markets, indicating some convergence may occur.

It’s worth noting that growth rates differed: Abu Dhabi had the fastest RevPAR growth in 2024 (+26% YoY), outpacing Provincial (+10.6%) and far above Dubai’s modest +4.2%. This suggests Abu Dhabi has momentum and could further improve its rankings, while Dubai’s growth was more mature. Nonetheless, Dubai’s absolute performance remains the benchmark to beat in the UAE and the wider region.


Class Segment Ranking (latest 12 months):

  • Occupancy by Class: 1) Midscale & Economy – 83.0%; 2) Upscale & Upper Midscale – 81.2%; 3) Luxury & Upper Upscale – 76.2%. Lower-priced hotels are filling more of their rooms on average, indicating stronger relative demand for budget options (and possibly longer stays or essential travel segments). Luxury hotels run lower occupancy, partly by design (yield management, exclusivity, more seasonality).

  • ADR by Class: 1) Luxury & Upper Upscale – $285.96; 2) Upscale & Upper Midscale – $106.21; 3) Midscale & Economy – $69.60. This stark contrast (luxury ADR ~4x economy ADR) highlights how stratified pricing is in the UAE market. Luxury rates are buoyed by 5-star beach resorts and iconic properties (some with ADRs well above $500), whereas economy rates cater to an entirely different clientele.

  • RevPAR by Class: 1) Luxury & Upper Upscale – $217.76; 2) Upscale & Upper Midscale – $86.28; 3) Midscale & Economy – $57.73. In RevPAR, luxury’s lead is evident – a function of high ADR overcoming lower occupancy. Midscale trails far behind in dollar terms, but notably midscale RevPAR (at $58) is very strong relative to its ADR, thanks to efficient occupancy. In fact, midscale’s occupancy advantage partly compensates for its low rates.


Implications: The competitive benchmarking shows that Dubai vs Abu Dhabi is a tight race for top performance, and these two will likely continue to set the pace. For investors or operators, assets in these cities generally yield higher returns (given higher RevPARs) but also come at higher cost. The provincial markets offer growth potential – their double-digit RevPAR gains indicate opportunity for catching up – yet they remain substantially behind on absolute performance. Within segments, the luxury tier, while commanding outsized RevPAR, faces the challenge of maintaining occupancy – meaning competitive strategy at the high end often involves creating unique experiences to drive demand rather than competing on price. The economy segment’s strength in occupancy suggests that demand for affordable accommodation is robust and perhaps under-served in some areas; however, the low ADR limits revenue growth, so scaling and cost management are key for success there. A balanced portfolio across segments and geographies could hedge risks – e.g., luxury properties for rate-driven growth and economy properties for volume stability.


Investment and Development Outlook

Investment trends in the UAE hospitality sector mirror the market’s performance cycle: development and transaction activity tend to follow confidence in the industry’s prospects. As of 2025, we observe an environment of renewed development interest and selective investment transactions:


  • Construction Pipeline: The UAE’s hotel construction pipeline is significant, indicating developer optimism. At mid-2025, there are 15,993 hotel rooms under construction across the country. For context, this figure is about 7% of the existing national supply – a sizable expansion on the way. The distribution of this pipeline is uneven: Dubai accounts for the lion’s share with 11,114 rooms (roughly 70% of the pipeline), aligning with its ambitions to keep growing tourism capacity. In percentage terms, Dubai’s pipeline is about 7.3% of its current inventory. Provincial emirates (notably Ras Al Khaimah, Sharjah, etc.) have around 4,049 rooms underway, which is a 13.2% expansion of their existing stock – the highest growth rate, suggesting smaller markets are aggressively trying to boost their tourism infrastructure. Meanwhile, Abu Dhabi has a relatively small pipeline (830 rooms, ~2.7% of current inventory), reflecting a strategic pause after a period of oversupply in the 2010s and a focus on stabilizing performance. The development trend thus points to continued heavy building in established and emerging leisure markets (Dubai and RAK in particular). Over the next 2–3 years, we expect annual new supply additions to pick up to ~3,000–5,000 rooms, from under 1,000 rooms delivered in 2024. One notable project is the upcoming Wynn Resort in Ras Al Khaimah (due ~2026), which will add ~1,000 luxury rooms and introduce new concepts (potentially including gaming) to the region – this is indicative of the type of “transformational” developments in the pipeline. Dubai’s pipeline includes multiple high-profile projects (theme park hotels, expansions to existing resorts, and new hotel/residential towers) aiming to reinforce its position post-Expo. The key risk with the pipeline is the potential for oversupply if demand does not grow as fast. However, the staggered nature of openings and a trend toward more unique, segmented offerings (e.g., eco-resorts, ultra-luxury boutique hotels, etc.) may mitigate head-to-head competition. We also note that some pipeline projects could yet be delayed or cancelled if market conditions change – a natural valve to prevent severe oversupply.


  • Investment Sales Activity: Unlike in some Western markets, hotel transaction activity in the UAE is relatively low-volume. Many hotels are owned by long-term investors (government-related entities, wealthy families, or dedicated hotel owner/operators) who do not trade assets frequently. The data from recent years reflects this: 2023 saw only 2 major hotel deals closed in the UAE, totaling $217.9 million in volume. In 2024, there were more transactions (12 deals recorded) but apparently with undisclosed values (the CoStar report shows $0 volume, likely due to missing data or those deals being smaller/undisclosed). In the first half of 2025, only 2 deals occurred, totaling $463 million – a sizable increase in average deal size. The average pricing of transactions has been quite notable. In H1 2025, the average price per hotel was $231 million, equating to ~$727k per room – indicating these were high-end assets changing hands. Indeed, the price per key is extremely high by global standards, suggesting trophy properties (likely luxury beachfront resorts or prime city hotels in Dubai) were involved. Similarly, the 2023 average price per key was reported at $1.64 million (though based on just two deals – possibly one of them being an iconic ultra-luxury resort sale). These figures underline that when UAE hotels do trade, they often command premium valuations. Cap rates for such transactions are not explicitly given (and the report’s market cap rate fields are blank), but back-calculating from typical EBITDA yields, these pricing levels imply cap rates in the mid-single-digit range (~4–6%). Investors are essentially pricing in the strong income growth potential and the lower risk perception of UAE (economically and politically stable, with government support for tourism). It’s also worth mentioning that some hotel “sales” in the region are structured as transfers within affiliated companies or involve partial stakes, which may not be captured as open market deals.


  • Investor Sentiment and Outlook: The investor outlook for UAE hotels appears cautiously optimistic. The combination of full recovery in operating performance, high-profile tourism projects, and global capital searching for yield has made the UAE an attractive target. However, liquidity remains thin – partly because top assets are tightly held and not many are on the market. Those owners that are willing to sell can demand top dollar, as seen by pricing trends. Going forward, we might see increased interest from institutional investors and foreign funds, especially as the UAE further liberalizes investment laws (e.g. allowing more 100% foreign ownership in certain cases). The types of assets likely to transact include: hotels that are non-core to large developers (e.g., when real estate firms offload hotel components of mixed-use projects), older properties ripe for repositioning, and possibly portfolios of smaller hotels. Dubai will remain the primary focus for investors given its global city status – for instance, any iconic property that comes up (like a marquee hotel on Palm Jumeirah or downtown) would generate significant demand. Abu Dhabi might see selective trades, often involving government-related entities rationalizing their portfolios. Emerging markets like RAK or Sharjah could attract opportunistic investors betting on future growth (e.g., acquiring a beach resort in RAK ahead of the gambling legalization there). Overall, we expect modest growth in transaction volume over the next few years, but unlikely to exceed a handful of deals per year unless a major portfolio offering occurs. Asset values should remain high, supported by the strong earnings outlook – thus cap rates are anticipated to remain low (perhaps 6% or below for prime assets, lower for ultra-prime), in line with global gateway city benchmarks.


  • Development Investment: On the development side, construction cost inflation and rising interest rates globally could be a constraint. However, the UAE has relatively accessible financing and often, hotel development is backed by strategic capital (e.g., sovereign wealth funds, or as part of larger mixed-use developments where residential sales subsidize the hotel component). The robust pipeline indicates that developers are confident in long-term demand. We may see more international hotel brands entering or expanding in the UAE through management contracts, as the market matures (for example, recent announcements of new lifestyle brands and boutique operators in Dubai). The focus seems to be on differentiated offerings – either super-luxury (to capture ultra-high-end demand) or specialized concepts (all-inclusive resorts, eco-friendly resorts in mangroves/deserts, etc.), as opposed to generic upscale hotels. Another trend is adaptive reuse and renovation: some older hotels in Dubai are being refurbished or even converted to different uses (serviced apartments, etc.) to meet evolving demand. This is a form of reinvestment that improves the quality of supply.


In conclusion, the investment outlook for UAE hotels is positive, underpinned by strong performance metrics and supportive government vision. New supply is coming, but it is by and large strategically planned, and demand is expected to keep rising. For investors, the market offers strong cash flows and capital appreciation potential, though entry requires paying a premium and patience due to limited availability of assets. We foresee the UAE maintaining its status as the Middle East’s most attractive hotel investment market, with Dubai at the forefront, Abu Dhabi offering stability and high yields, and emerging emirates providing growth stories for those willing to take on a bit more risk.


Conclusions

The United Arab Emirates hotel and hospitality industry has emerged from the challenges of the past decade stronger and more mature. By mid-2025, performance has fully recovered and even surpassed previous benchmarks, thanks to a confluence of prudent supply management, aggressive demand stimulation, and the sector’s inherent attractiveness to global travelers. All indicators – occupancy, ADR, RevPAR, and profit metrics – point to a robust industry now operating near peak capacity and efficiency.

Looking ahead to 2029, we expect the industry to enter a phase of sustainable growth rather than roller-coaster fluctuations. Occupancies will likely normalize in the mid-70s percentile, providing a solid base for revenue generation without the extreme tightness that can spur overbuilding. ADRs are on track to reach new highs, but gradually, as the market absorbs new competition. Importantly, RevPAR growth will be steady and should outpace inflation, meaning real gains for owners and operators.


Key strategic takeaways include: the importance of balanced development (avoiding the oversupply of the late 2010s), continued diversification of demand (new source markets and segments to fill those new rooms), and investment in quality and differentiation (to justify rate premiums, especially as more product comes online). The profitability analysis shows that UAE hotels have healthy margins – protecting those margins against rising costs (energy, labor, etc.) will be vital. In that regard, embracing technology, staff training, and smart cost control will remain on the agenda for operators.


From a competitive standpoint, Dubai and Abu Dhabi will continue to lead, but with Abu Dhabi likely playing a stronger second fiddle than before, and other emirates gradually making their mark. This intra-UAE competition is a positive, pushing each region to refine its tourism offering (e.g., cultural tourism in Sharjah, adventure in RAK, luxury in Dubai, events in Abu Dhabi). Collectively, it enhances the UAE’s appeal.


For investors and stakeholders, the UAE hospitality sector offers a compelling story: high returns in a growing market, underpinned by government support and global demand. While not without risks – global economic swings, geopolitical tensions, or a potential overbuild if discipline falters – the sector’s trajectory is overwhelmingly encouraging. The construction pipeline and investment trends signal confidence in the future, but also warrant vigilance to ensure that new supply is met with equally creative marketing and demand generation.


In conclusion, the UAE’s hotel industry is poised to transition from recovery to expansion on the back of strong fundamentals. The next five years will likely see new records in visitor numbers and tourism revenues. Stakeholders who navigate this period with strategic insight – calibrating supply additions, investing in guest experience, and maintaining fiscal prudence – will be well placed to reap the rewards. By 2029, the UAE is set to solidify its position as a world-leading hospitality destination, characterized by high occupancy, high ADR, and high profitability – truly a case study in resilient and dynamic growth in the global hotel landscape.


July 1, 2025, by Michal Mohelsky, J.D., principal of MMCG Invest, LLC, hotel feasibility consultant, serving UAE, Dubai and Abu Dhabi Feasibility Study Consultant


Sources: MMCG Database

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