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When you think of Dubai, you probably picture the Burj Khalifa — the world’s tallest building — super-luxury hotels, and its famous set of man-made islands.
Such projects were designed to put the emirate on the map and were driven more by “return on ego” than return on investment.
Now the city is switching gears. In its pursuit of becoming one of the top three international tourism destinations in the world, mass-market products are coming into focus.
“From a mid-market perspective, where Dubai continues to grow, we’re expecting staggering volumes,” said Premier Inn Middle East managing director Simon Leigh at the Skift Global Forum East conference in Dubai. “Looking at the numbers [projected] by Dubai Airport, I think the market can still take on more volume. So from our perspective, mid-market plays into that, you need that mid-market offer. It’s important for the overall balance.”
Premier Inn is a giant in the economy segment in the UK and runs 11 hotels in Qatar, Abu Dhabi, and Dubai.
The 1-3 star hotels make up just 19% of Dubai’s 152,000 hotel rooms this year. Five-star make up 35% of rooms and four-star account for 29%. This lopsidedness towards luxury is at odds with a city building a new airport with a capacity of 260 million travelers.
Dubai welcomed 17.15 million international guests in 2023, and by 2025, wants as many as 25 million.
Leigh added: “Is there a gap in the market? Yes. There’s a fair slug of the market already in the middle segment but that doesn’t mean there aren’t more opportunities. To continue to further the growth ambitions of Dubai, you need that mid-market point. Not everybody can afford the ultra-luxury.”
Investors in Dubai and the region are waking up to the opportunities outside of luxury, said Maya Ziadeh, Accor’s chief development officer for premium, mid-scale and economy brands in the Middle East, Africa and Turkey.
“I’ve been in this region for 23 years,” said Ziadeh. “When I started my career, I met many investors who wanted only luxury and ultra-luxury brands. That’s fine, that’s a normal evolution in a market [whereby] you start with luxury and then you diversify.”
“That was mainly ego-driven, that’s normal in the region too. Now we’re seeing more discussion on return on investment and how investors can have a faster ROI. They are discussing lower operational costs, and that’s what mid-scale brands offer.”
Why Do An ‘Ego Project?’
Rove is a prominent mid-market operator in the UAE with 4,000 rooms in the country. It is jointly owned by Emaar and Dubai Holding.
Rove’s chief operating officer Paul Bridger praised the construction of these so-called “ego projects,” saying it was exactly what the city needed.
“You have to have these flagship properties — you can call it ego — but it’s about building a destination. We all know Dubai because of Burj Al Arab, Burj Khalifa, and so on,” he said.
Bridger likened Dubai’s evolution to what is happening in Saudi Arabia right now, where “trophy assets” like Neom, Diriyah Gate, and The Red Sea dominate conversations around its tourism sector.
“I don’t think [mid-scale hotels] were ever not on the agenda of the government. It’s a bit like the giga-projects in Saudi now: You have the trophy assets making headlines but in reality, the majority of visitors go to [hotels] the next three or four levels down.”
The Saudi Tourism Authority (STA) told Skift in May that it expects only 20% of the kingdom’s projected international visitors will stay in four-star hotels and above by 2030. The country has its own target of 70 million international visitors by 2030, compared to 27.4 million last year.
Of the 320,000 planned new rooms for Saudi by 2030, as many as 80,000 could be in Neom alone. The Red Sea’s official projection is for 50 hotels — 8,000 rooms and 1,000 residences. Diriyah, a cultural heritage site outside of Riyadh, has signed 42 hotels so far.
Premier Inn’s Leigh said Saudi is a key market for him moving forward.
“Take Saudi Arabia, we’ve been looking there as a key target market. We’re working our way through the process. Take Riyadh and Jeddah alone, we don’t need to be anywhere near a giga-project to be successful. Look at the market rates and the number of keys required, there’s no need to chase trophy locations. They’re inevitably expensive.”
Ziadeh added she has had immense demand for her brands in these giga-projects, though at the time of writing, only a handful of non-luxury brands have been unveiled.
“We are actively working on projects in giga-projects. Even for giga-projects, there is a huge demand for mid-scale. We’ve seen a shift in the mindset of investors, they now want design-led, mid-scale brands like Tribe and Handwritten Collection.”
Diversifying Destinations
The eventual goal for Dubai, Saudi Arabia, and other Middle East destinations isn’t to build pockets where luxury travelers stay in one place and mid-market stay in another. Instead, travelers of today often mix and match categories as experiences become more important than where you stay.
Bridger reflected: “You need the headlines for the attention. Then the other brands come in and support. Also, it’s not necessarily either or. We’re quite good at segmenting travelers and calling them certain things, but a traveler could stay in a luxury hotel one trip and a Rove the next.”
“The younger population, in particular, wants to spend more of their money on experiences. When I go to our lobbies, our guests are not budget travelers. There’s often a luxury car outside. That’s a misconception.”
Ziadheh said the key is to build destinations with a mix of both so as to tap into the greatest opportunity of all: A rising middle class. She said: “With luxury, we do not compete. We complete each other. Dubai continues to be a luxury destination, but in order to grow the audience and attract more tourists, we need to diversify. Think middle class, India, Africa, and China.”
“We need brands with lower construction costs. So investors, whether in UAE, Saudi, or the wider region, there is an appetite for a lower construction cost and a faster ROI.”
