Average daily rates at Abu Dhabi’s hotels recorded a 4.1 per cent year-on-year drop in May to reach Dh433, resulting in a 2.9 per cent decrease in revenue per available room to Dh322, according to the latest data from STR, a global consultancy.

Meanwhile, occupancy rates rose 1.3 per cent to reach 74.4 per cent, supported by the Isra and Mi’raj holiday in the first week of the month.

The long weekend boosted occupancy on Thursday, May 5 to 95.4 per cent and average daily rate to Dh558. Occupancy on Friday, May 6 reached 86.8 per cent while rates were Dh530.

The STR preliminary data also showed that demand marginally outpaced supply, with a four per cent increase in supply versus a 5.3 per cent increase in demand in May 2016 compared to the same month in 2015.

Christopher Hewett, associate director at TRI Consulting, said average room rates will continue to soften throughout 2016 though occupancy rates may remain flat.

“I think a lot of the [drop in rates] has to do with economic concerns in the region at the moment. Abu Dhabi and a number of other cities in the GCC have been impacted by oil prices so that will have an effect not only on government spending but on private consumption and other corporate spend,” he said.

Hewett pointed that while Abu Dhabi continues to see an increased number of tourists coming in, the hospitality market is heavily driven by the local corporate and government sectors, which are both seeing a drop in spending.

“I think we’re going to see an even growth in supply and demand. However, looking ahead, I think room rates are going to continue to be soft for the rest of the year. The pressure of reduced spending is going to impact hotels, and we can see that by the end of 2016, we’re probably looking at a 7-8 per cent reduction in room rates compared to 2015,” he said.