Government initiatives to reduce land costs in Dubai have not prevented land prices from continuing to be the biggest barrier to developing more budget hotels across the emirate.

Speaking on the sidelines of the Arabian Hotel Investment Conference (Ahic) in Dubai today, Bani Haddad, regional vice president of the UK’s Wyndham Group, told MEED that despite growing demand for budget hotels, too often land prices put developers off, due to a reduced return on investment.

“Nevertheless, we have seen an effort in recent years by local authorities, and… there are cheaper areas emerging around the emirate,” said Haddad.

In other developed regions, budget hotels flourish in areas just outside city centres, but with the low disparity in land prices across cities such as Dubai and Doha, this trend has been less evident.

“The region has been able to accommodate budget hotels within mixed-use projects, where developers have been able to boost revenues through other amenities such as residential and commercial units,” said Haddad.

The segments that offer the best opportunities for developers are mid-market properties and schemes that will attract the growing number of tourists who want to stay in budget options when visiting Dubai.