The Kuwait-owned Action Hotels has bought a freehold site in Dubai Media City for US$10 million and plans to open a property by 2018.
The developer of three and four-star hotels said that it bought the 5,553.5 square metre site within Media City’s Innovation Hub from a subsidiary of Dubai Holding’s Tecom Group.
Innovation Hub is a new, 1.6 million sq feet complex being built at Media City that will have up to 15,000 workers.
The area is served mainly by five-star, luxury hotels while there is only one other mid-market hotel nearby, Action Hotels said.
The company said that it is in talks with several hotel brands with a view to operating the property, which it plans to complete in 2018.
Action Hotels has one other Dubai property: a four-star hotel being built in Dubai Healthcare City on the other side of the emirate, close to Sharjah. It owns a Premier Inn property in Sharjah and is developing other UAE hotels, including a Tulip Inn at Ras Al Khaimah and a Staybridge Suites in Abu Dhabi.
“I am delighted that we have agreed to acquire this prime freehold plot of land in such a desirable area,” said Sheikh Mubarak A M Al Sabah, the founder and chairman of Action Hotels. “This acquisition reinforces our presence in key locations in Dubai.
“Media City is a thriving area of Dubai with more than 4,500 companies and we have identified strong demand for quality, affordable accommodation. This sought-after location is generating significant operator interest and as always we will be working with our partner hotels brands to secure the best terms.”
Charles Bott, the head of hotels, hospitality and leisure at the property consultancy Cavendish Maxwell, said that branded, budget and mid-market hotels in the Middle East were a relatively new phenomenon but there has been a surge of investment in them.
This is partly because the region has higher-than-average daily room rates and occupancy levels. “A second factor is the high number of Middle East business guests who have come to believe in the importance of brands. Luxury hotels have educated the market to like brands,” he said.
Mr Bott said that another major motivating factor is that budget hotels tend to be more profitable than five-star properties as they cost less to develop and have more resilient occupancy levels in times of a downturn.
“Worldwide trends show that a return on investment for a five-star hotel would take – on average – between seven and nine years, compared to the return on a budget hotel of five to six years,” he said.
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