New budget hotels for capital

A new no-frills hotel brand is coming to Abu Dhabi to take advantage of a shortfall of affordable accommodation for budget travellers. CAPM Investment, the investment company based in Abu Dhabi, has formed a joint venture with the Dubai-based Layia Hospitality to launch the budget hotel in the capital, as it looks to capitalise on lower construction and land costs and a need for more economical accommodation in the region.

Called Day and Night Hotels, the plan is to initially develop five of the alcohol-free hotels in Abu Dhabi at a cost of about Dh500 million (US$136.1m). This was "an attempt to bridge the undersupply of three-star hotels in the region and especially in Abu Dhabi," said Khaled Almass, the chairman of the board of CAPM Investment. "The company is seeking to capitalise on the growing need for high-quality accommodation at a reasonable price.

CAPM Investment will own the hotel properties and has a 20 per cent share in the new hospitality company formed with Layia Hospitality, which has been named Layia Abu Dhabi. The first of the hotels is expected to open within two years, with a room rate of between $100 and $150, and they are expected to appeal to business and leisure travellers. "The Middle East market is now mature enough to accept the concept of budget hotels," said Ahmad al Yousuf, the chairman of Layia Hospitality. This had been helped by the expansion of low-cost carriers in the region, including Air Arabia and Jazeera Airways, Mr al Yousuf added.

The hotels, which are aiming to appeal to "trendy, modern, budget-conscious travellers", will offer 24-hour gym facilities and low-cost restaurants. CAPM Investment said it would invite institutional and independent investors to provide the initial required capital of Dh125m for the project. The company said it had already attracted substantial interest from high-net worth individuals in Abu Dhabi.

The alcohol-free status of the brand would also attract Islamic investors who might otherwise avoid hotel investments, CAPM Investment said. "Seeing the weak current and future supply pipeline in the branded budget and mid-scale segments, a joint venture between CAPM Investments with a local and experienced operator such as Layia Hospitality will [allow] hospitality investors to seriously focus on new development opportunities, targeting a different demand profile in an under-developed asset class," said Arnaud Andrieu, the vice president of CB Richard Ellis Hotels Middle East.

Two other budget brands - Centro by Rotana and Rezidor's Park Inn - opened in the capital last October, and offer room rates from about Dh450. More than 4,000 hotel rooms were added to the capital's existing 13,000 last year. This has started to put pressure on room rates and occupancy levels in Abu Dhabi, which had long been one of the most expensive destinations in the world because of its shortage of accommodation.

In November, revenue per available room (REVPAR), the benchmark indicator for the industry, declined 53 per cent in Abu Dhabi from the year earlier to US$171.97 from $367.24. REVPAR includes occupancy and room rates. Occupancy was down to 58.9 per cent in November from 89.3 per cent in the same month in the previous year, data from the London consultancy STR Global show. A further 5,000 rooms are expected to open in Abu Dhabi this year.

Daniel Hajjar, the chief executive of Layia Hospitality, said various locations for the hotels had been identified but contracts had yet to be signed. "Abu Dhabi is widening, so we are looking at opportunities throughout the emirate," Mr Hajjar said. "Day and Night will be going outside of the UAE, not just in Abu Dhabi, but definitely in Dubai and other cities, plus the remaining parts of the region and overseas."

@Email:rbundhun@thenational.ae