UAE Hotels Bet on Short-Haul Demand as Recovery Splits

By Elena Vasquez

Dubai recorded 6.97 million international visitors in the first eight months of the year, down 44%, while UAE hotel occupancy stood at 67.6% in September, down 12.3 percentage points from a year earlier.

Dubai’s Department of Economy and Tourism reported the visitor figure; CoStar reported occupancy. The combined data show pressure across the market, though not an even downturn. Luxury and upper-upscale hotels recorded the steepest occupancy declines, according to consultancy Cavendish Maxwell.

Midscale properties held up on regional, domestic and corporate demand. Budget and midscale hotels generally fared better because they draw on a broader mix of arrivals, while luxury properties remain more exposed to long-haul guests and Middle East unrest.

A short-haul strategy replaces distant demand

Hotel operators now lean on arrivals from India, China, Russia and the Gulf to rebuild demand after the U.S.-Iran war and a March flight disruption. Higher airfares continue to suppress long-haul travel. Luxury hotels, already exposed to high-spending long-haul guests, face the hardest recovery.

“We’re targeting short-haul markets like India, China, and Russia, that are a five- to six-hour flight away,” said Saurabh Tiwari, vice president for the Middle East, Maldives and Sri Lanka at IHCL, which operates the Taj brand.

Tiwari also said: “Since jet fuel prices are more expensive than before, it is hard to expect people to come from long-haul markets like the Americas or Australia. Attracting visitors from long-haul [markets] is going to be wishful thinking.”

India has been IHCL’s most reliable source market through the crisis because it offers accessibility and lower flight prices than long-haul destinations. Lower room prices also make Dubai more affordable to some travelers, adding a second price advantage as operators pursue nearby markets.

Lower rates and longer stays cushion occupancy

Operators have bridged the demand gap with discounting and longer stays. Those levers trade room revenue per night for more occupied nights, although the available figures do not quantify the net effect.

Majestic Hotels said long stays now make up 25% to 30% of its business. The operator expects fourth-quarter rates to run 15% to 20% below last year.

IHCL cut rates by up to 40% at the crisis peak. The Taj brand operator does not expect business to return to 2025 levels until the fourth quarter of 2027.

These moves alter the revenue equation: a 15% to 20% rate cut, or one as deep as 40%, lowers revenue per occupied room. Longer stays can add occupied nights, but the figures do not show how much occupancy or duration must rise to offset the discounts.

Recovery forecasts remain far apart

Recovery estimates show how far apart the market remains. Ishraq Hospitality expects a return to 2025 levels in the current quarter, while IHCL does not expect the same until the fourth quarter of 2027.

The divergence leaves little basis for one marketwide recovery assumption. Midscale hotels have gained from corporate, regional and domestic guests, while the properties most dependent on international long-haul travel still need either stronger arrivals or continued rate concessions.

Majestic’s long-stay mix provides a larger base of occupied nights, but its fourth-quarter rate forecast also means less revenue per booking night. IHCL’s deeper discount and 2027 target show that rate recovery could remain limited even where short-haul demand is reliable.

Rental bookings improve into winter

Short-term rental operators report a more balanced guest mix and point to European winter schedules and December events as supports for demand. AirDNA’s booked-night data show sequential improvement, though every reported month remains below its comparison level.

• November booked nights: down 36%
• December booked nights: down 8%
• January booked nights: down 6%

The narrowing declines indicate a less severe winter outlook than November, but still point to contraction through January. The booking curve offers a demand signal; it does not yet show a broad hotel recovery.

What does this shift mean for operators?

For UAE operators, the practical change is a need to plan around source markets and hotel segments rather than one marketwide recovery date. Midscale hotels have a broader demand base, while luxury and upper-upscale properties face the steepest occupancy declines. IHCL’s India business has proved most reliable, but even that operator expects 2025 levels only by the fourth quarter of 2027.

The next test is whether European winter schedules, December events and the improving short-term-rental booking curve convert into higher UAE occupancy; until then, recovery expectations range from the current quarter to the fourth quarter of 2027.