Dubai's luxury retail sector hit by Russian stayaways in Q2
The decline in Russian tourists visiting Dubai has led to a slowdown in luxury retail sales in the emirate during the second quarter of 2015, according to new research.
JLL said in a report that Dubai's retail market remained largely stable during Q2, as no new deliveries occurred.
It said retail performance remained steady across all malls in the emirate, with a slowdown in annual rental growth levels and retail sales, largely driven by a decline in the number of tourists from Russia.
The JLL report said the delivery of 194,000 sq m of gross leasable area (GLA) is expected throughout the remainder of 2015, comprised mainly of extensions to existing super regional malls, including Dragon Mart, Ibn Battuta, and Mall of the Emirates.
Craig Plumb, head of research at JLL MENA, said: "Retail performance has been steady during the second quarter, with no noticeable increases in rents across the different mall types.
"Retail sales, particularly in the luxury segment, have slowed, driven primarily by the decline in tourist numbers from Russia, while the current level of market saturation in the food and beverage segment is expected to put pressure on retailers to differentiate their offerings in the face of strong competition."
JLL also said Dubai's hotel sector continued to face downward pressure in the second quarter of the year amid a slowdown in visitors from Russia and the Eurozone.
The report said average daily rates (ADR) saw a 6 percent decrease to $249 in the year to May. Coupled with a marginal decline in occupancy rates, revenue per available room (RevPAR) registered $208, a 9 percent decline year-on-year.
JLL said it anticipates ADR may soften further in the short-to-medium term, in response to the additional 30,900 keys scheduled for delivery over the next couple of years and a slowdown in visitors from Russia and the Eurozone.
Chiheb Ben Mahmoud, head of the hotels & hospitality group at JLL MEA, added: "The Dubai hotel sector maintains its position as the strongest in the region, amid continued softening of the activity indicators.
"Q2 continued to reflect the impact of the drop in the number of tourists from Russia and the Eurozone. ADR adjustments allowed the impact on the city occupancy rate to be relatively limited remaining in the range of the ten-year historical average.
"Translating the push for competitiveness, the ADR for Q2 2015 stands at 7.2 percent lower than the ten-year historical average, highlighting the need for hotel owners and operators to focus on operational efficiencies."
