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Dubai Investors fine with Four Star Projects

For investors and developers, the four-star hospitality is as good as the five stars. The government until 2019 is not taking any tax receipts on three- and four-star properties which are a huge incentive when one is looking for yields or revenue projections. Four-star hotels in Dubai have provided exceptional returns except for investments in restaurants or supermarkets if you see businesses that have consistently done well even since 2008.

More areas of the city are opening up for mid-tier hospitality projects for investors and developers. In fact, the hotel boom for four-star has a close following of the mostly mixed-use communities which are getting built in the city. As Expo 2020-Dubai South location features this development activity, the choice for hospitality operators scales up accordingly.

Deira Islands development

Picture Courtesy: res.cloudinary.com

Through the Deira Islands development, there are prospects shaping up offshore also. Except for the high-end resorts, the master-development Nakheel will also witness a fair sprinkling of value-based hospitality offerings.

Hotel owners and operators enjoy the margins which differ with the range of operations. The challenge is managing the costs of an individual asset because of high administrative and infrastructure costs required to market the hotel successfully. Cost effective solution in such cases is a franchise model or management contract with a brand.

Own and operate model works to the developer’s advantage when the operations are scaled by more than one property which may result in a 6-8 percent rise in their returns.

The diagramme

Picture Courtesy: masterkeyproperties.com

The intention for Shuraa’s Al Fuqaei, is to construct & not own the properties. He made a successful exit from a joint venture, the very first project, with a location of Bur Dubai. He started the construction in early 2012 and sold it in 2014, generating the development cost of more than Dh20 million. For the other two projects, the profit realizations were better. But, it’s better to do one project at a time.

theme park

Picture Courtesy: www.thenational.ae

Now when the Dubai Parks and Resorts’ built theme parks in Jebel Ali are ready and coming up, the investors growing interested will be there for hotel-specific projects around that vicinity. Good time for developers and investors to launch mid-market hotel projects would be when a particular emerging location gets the infrastructure ready for bulk. Prices for land are still attractive.

Such projects take less time if the funds are available. Hotel operator being on board and having the property, ready with the selling price, one can sell it carrying a higher premium. This status will be continued in 2020 and even after that. It’s one reason why the development profile of Shruaa will be confined strictly to hospitality.

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