Dubai Mid-Market Hotels Outperform Premium Sector in H1 2026

DUBAI, UAE: Dubai’s mid-market hotels recorded comparatively higher occupancy levels than the premium sector during the first half of 2026, as regional airspace disruption and heightened geopolitical uncertainty weighed on international hotel demand, according to Cavendish Maxwell.

Hotels in the Upper Midscale category recorded the highest occupancy rates at nearly 66%, while Midscale properties achieved almost 64%. By comparison, Luxury and Upper Upscale hotels and resorts averaged 51% and 52%, respectively, according to Cavendish Maxwell’s Dubai Hospitality Sector H1 2026 Market Performance report.

Average occupancy across all hotel classifications stood at 56% between January and June, down 30% compared with the same period last year.

However, the annual decline has narrowed since April, with targeted promotions and staycation campaigns supporting demand from domestic travellers. Cavendish Maxwell expects occupancy levels to continue recovering during the remainder of the year as international travel is expected to pick up again.

Mid-Market Hotels Show Greater Resilience

Vidhi Shah MRICS, Director, Head of Commercial Valuation at Cavendish Maxwell, said: “The relative resilience of mid-market hotels reflects their broader demand base, including domestic, regional and corporate travellers, which has provided some insulation over the last six months. By contrast, premium hotels – those in the Luxury and Upper Upscale segments – are typically more reliant on international leisure demand and higher-spending travellers, making them more sensitive to disruption to air travel, traveller confidence and discretionary spending.

“With Dubai’s key events season and the winter tourism period approaching, alongside the gradual restoration of air connectivity, we would expect trading conditions to improve during the latter part of the year. However, the pace and extent of recovery will depend on how quickly international travel demand and traveller confidence normalise. While stronger performance is likely during the traditionally busier fourth quarter, this may not be sufficient to fully offset the weaker first half, and full-year occupancy is therefore expected to remain below the record levels achieved in 2025.”

The report indicates that the performance gap between hotel categories reflects differences in their underlying customer bases, with mid-market properties benefiting from a broader mix of domestic, regional and corporate demand.

Average Daily Rate Reaches $191

The Average Daily Rate (ADR) across Dubai hotels stood at $191 (AED701) during the first six months of 2026, representing a 7% decline compared with the same period last year.

The decrease was significantly smaller than the 30% fall in occupancy, suggesting operators prioritised preserving room rates rather than using aggressive discounting to stimulate demand.

Luxury hotels continued to command the highest room rates despite recording a 6.2% year-on-year decline. Upper Upscale properties proved the most resilient, with ADR falling by 2%.

Cavendish Maxwell expects Dubai hotel ADR to range between $163 and $184 (AED600 and AED675) by the end of the year.

Dubai Hotel Supply Stands at 152,140 Rooms

Three new hotels opened in Dubai during H1 2026, although the additions were offset by the closure of some properties, resulting in a small reduction in overall supply.

By mid-2026, Dubai’s hospitality market comprised almost 152,140 rooms across 727 hotels, representing reductions of 0.3% and 1%, respectively, compared with year-end 2025.

The figures include establishments that temporarily closed during the first half for renovation or refurbishment and remain offline.

Around 3,150 rooms are scheduled for delivery by the end of 2026, which would bring total supply to approximately 155,300 rooms.

Cavendish Maxwell said the rate at which the market absorbs this additional inventory will be an important factor in overall hotel performance during the remainder of the year.

A further 2,580 rooms are expected to enter the market in 2027, followed by another 2,470 in 2028.

Premium Hotels Account for Nearly 70% of Supply

Dubai’s hotel inventory remains heavily concentrated in the premium categories.

Upscale, Upper Upscale and Luxury properties collectively represented almost 70% of all rooms during H1 2026. Upscale hotels accounted for almost a quarter of available rooms, followed by Upper Upscale at almost 22% and Luxury at 21.5%.

Midscale hotels represented 14.4% of the market, Upper Midscale 13.7% and Economy properties 4.5%.

According to Cavendish Maxwell, the premium sector’s dominant share reflects Dubai’s established position as a luxury travel destination, but also leaves a larger proportion of hotel inventory exposed to fluctuations in international travel demand and air connectivity.

Air Connectivity Expected to Support H2 Recovery

Looking ahead, Cavendish Maxwell expects restored international air connectivity to be the principal driver of the hospitality sector’s recovery.

Airlines that suspended or reduced Dubai services during H1 2026 are scheduled to resume operations during the second half, potentially supporting a recovery in international visitor demand.

Vidhi Shah said: “Emirates Airline is now operating at nearly 85% pre-conflict levels and adding capacity, supporting hotel occupancy recovery, particularly in the premium segments that tend to rely on international, long-distance travellers. Measures by major UAE airlines – such as Emirates’ comprehensive travel cover and Etihad Airways/Abu Dhabi Department of Culture and Tourism’s complimentary medical travel insurance – are also expected to support traveller confidence.

“The recovery is also being boosted by government initiatives to ease pressure on hotel operators and stimulate demand, including the AED1 billion package introduced in April, the subsequent AED1.5 billion stimulus in May and more recent global marketing initiatives and campaigns like Dubai Summer Surprises and Dubai Invite.

“The pace of improvement will depend largely on the continued stabilisation of regional conditions, the restoration of international air connectivity and the strength of visitor demand, with any further deterioration in regional conditions likely to delay the recovery,” she added.

The government measures referenced by Cavendish Maxwell include an $272 million (AED1 billion) package introduced in April and a subsequent $408 million (AED1.5 billion) stimulus in May.

With Dubai’s major events calendar and winter tourism season approaching, the report points to improving conditions during H2, although full-year occupancy is expected to remain below the record levels achieved in 2025.