Dubai Mid-Market Hotels Outperform Premium Sector in H1 2026 Amidst Reduced Demand

Dubai's hospitality sector saw its mid-market hotels demonstrate greater resilience in the first half of 2026, outperforming the premium segment in occupancy rates. This trend emerged as regional airspace disruptions and heightened geopolitical uncertainties impacted international travel demand, as detailed in Cavendish Maxwell’s Dubai Hospitality Sector H1 2026 Market Performance report.

Occupancy and Rates

Hotels in the Upper Midscale category recorded the highest occupancy at nearly 66%, followed by Midscale properties at almost 64%. In contrast, Luxury and Upper Upscale hotels averaged 51% and 52% occupancy, respectively. The average occupancy across all hotel classifications for January to June was 56%, representing a 30% decline from the previous year. However, this annual decline has narrowed since April, supported by domestic staycation campaigns and targeted promotions.

Despite the dip in occupancy, the Average Daily Rate (ADR) across Dubai hotels remained relatively stable at AED 701 in H1 2026, a 7% decrease year-on-year. This indicates that operators prioritised maintaining rates over aggressive discounting. Luxury hotels continued to command the highest rates despite a 6.2% annual decline, while Upper Upscale properties showed the most resilience with only a 2% ADR reduction. Cavendish Maxwell forecasts ADRs to settle between AED 600 and AED 675 by year-end.

Supply and Future Outlook

Dubai's hotel supply saw a slight reduction in H1 2026, with three new hotels opening but offset by some closures. By mid-2026, the market comprised almost 152,140 rooms across 727 hotels, a marginal decrease of 0.3% and 1% respectively from year-end 2025. Approximately 3,150 new rooms are scheduled for delivery by the end of 2026, bringing the total supply to 155,300, with further additions planned for 2027 and 2028.

The majority of Dubai's hotel inventory remains in the premium segments, with Upscale, Upper Upscale, and Luxury categories collectively accounting for nearly 70% of all rooms. Midscale and Upper Midscale hotels represent 14.4% and 13.7% of the market respectively. While this premium dominance reinforces Dubai's position as a luxury destination, it also exposes a significant portion of the market to fluctuations in international travel demand and air connectivity. Recovery is expected to accelerate in H2 with restored international air connectivity and the upcoming event season, though full-year occupancy may not reach 2025's record levels.