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Hospitality Market Overview

Following a record performance in 2025, Dubai’s hospitality market experienced an externally driven slowdown during H1 2026, as heightened regional geopolitical tensions and associated airspace disruptions weighed on international travel demand. The impact was most visible in aviation and hotel occupancy, with passenger traffic at Dubai International Airport (DXB) declining 31.7% year-on-year during the first five months of the year to approximately 26.6 million, while citywide hotel occupancy fell 30.3% to an average of 56.4%. The slowdown was largely linked to a temporary reduction in international arrivals, with several international carriers suspending or reducing services to Dubai during the period.

The impact varied across hotel segments. Luxury and Upper Upscale properties recorded the steepest occupancy declines, reflecting their greater reliance on international long-distance travellers, while Midscale and Upper Midscale hotels proved more resilient, supported by a broader demand base including domestic, regional and corporate travellers. Despite the sharp decline in occupancy, Average Daily Rate (ADR) remained comparatively contained, declining by 7% year-on-year to AED 701. Operators broadly maintained pricing discipline and avoided widespread discounting, helping preserve the overall rate base despite weaker demand. A similar pattern was evident across the wider UAE, with Abu Dhabi, Ras Al Khaimah and Fujairah recording varying occupancy performance, while ADR remained relatively resilient.

Hotel supply remained broadly stable during the period, with Dubai’s hospitality market comprising 727 hotels and approximately 152,139 rooms in H1 2026. This represented a 1% decline in hotel establishments and a marginal 0.3% reduction in room inventory compared with year-end 2025, as several hotel closures offset new openings. Government support also provided relief to the sector, with economic support packages totalling AED 2.5 billion combining fee relief for operators with targeted demand-stimulation measures.

The market is expected to recover gradually during the second half of 2026, with momentum strengthening from Q4 as international air connectivity improves and the winter tourism season supports visitor demand. Full-year occupancy is forecast within a range of 60.4%–66.2%, with ADR expected at AED 600–675. Annual passenger traffic is forecast at 67.6–79.3 million, remaining below the record levels achieved in 2025.

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