Struggling Dubai hoteliers face forced sales as tourism slump deepens

Sylvain Vieujot has seen this pattern before. Hotel owners who borrowed heavily during Dubai’s boom years are now watching room income collapse, and by his reckoning, distressed assets will start reaching the market before the year is out.

Vieujot, co-founder and chairman of Equitativa Group, which manages the sharia-compliant Emirates Reit investment trust, is watching the pressure build in real time. The trigger was the conflict between the US, Israel and Iran, which sent occupancy rates at some Dubai properties plummeting to single digits and low teens as safety concerns kept international visitors away. “Hospitality is very much under pressure,” he told Arabian Gulf Business Insight. “If you have no income for a year, probably, and you have a big loan, you’re probably going to end up in some kind of trouble. So I expect to have huge opportunities by the end of the year.”

The disruption landed at the worst possible moment. Dubai had just closed a record tourism year in 2024, welcoming more than 19 million international visitors and generating approximately $72 billion in economic activity, nearly 13 percent of UAE gross domestic product, while supporting roughly 925,000 jobs. US and Israeli strikes on Iran in February, followed by Iranian retaliation and repeated safety alerts across the UAE, abruptly halted that momentum. The UAE has reported no fresh attacks since April 8, but lingering uncertainty about tourist confidence remains as the regional conflict continues.

The pain is not evenly distributed. Many of the owners now under pressure are private buyers who acquired properties when occupancy was consistently high and operations relatively straightforward. They face mounting debt service obligations against sharply reduced room income, a combination that tends to force decisions.

Major operators have already registered the damage. Accor, the world’s largest hotel company by number of properties, indicated that its Middle East losses in the first half of 2025 were concentrated almost entirely in the UAE. Despite this, Vieujot expressed confidence that Dubai would recover its appeal as a tourism destination. The harder question is what happens to individual hotel owners in the interim months or years while financial pressure mounts.

Equitativa itself is not planning to deploy Emirates Reit capital into hotel acquisitions. Any hotel investments would flow through a separate vehicle, keeping the trust’s focus on its current portfolio of office and education properties. That portfolio has held up well. Emirates Reit reported total property income rising 10 percent year-over-year to $21.2 million in the first quarter, with net property income climbing 16 percent to $19 million. Portfolio occupancy stood at 96 percent as of March 31.

By contrast, the office assets, particularly those at the Dubai International Financial Centre, barely flinched during the disruption. Vieujot noted that Emirates Reit continued signing new leases even at the height of the conflict. Some tenant renewals were delayed at the peak but subsequently completed without material changes in rental rates or demand. “We didn’t lose any tenants,” he said. The resilience reflects a structural advantage: office leases run long, meaning any deterioration in commercial real estate takes time to surface, unlike hospitality’s short booking cycles, where a week of cancelled reservations hits immediately.

Equitativa’s broader strategy casts a wide net. The group maintains a database tracking approximately 2,300 UAE properties built over more than a decade, positioning it to identify opportunities as assets come to market. The firm targets what Vieujot calls “properties that have problems” it can address, such as low occupancy, poor accessibility or weak management. Fully leased, problem-free assets command less discount, he noted.

Meanwhile, opportunities may emerge from companies divesting non-core holdings to raise cash. Residential developers could sell properties outside their main business lines. School operators who own their campuses but need expansion capital might sell buildings and lease them back, unlocking cash while providing buyers with long-term tenants and predictable income. Logistics assets and properties in Fujairah, the northern emirate gaining strategic importance after DP World agreed to develop two east-coast terminals, also represent potential acquisition targets.

Tighter access to financing in Fujairah could create openings for investors to back viable developments whose owners hold land or projects but lack the capital to proceed. None of this, Vieujot said, has shaken Equitativa’s long-term confidence in the UAE. “If you look 10 years down the line, I think we want to take the most advantage of this market now,” he said.

Whether enough distressed hotel owners actually reach the point of selling, rather than refinancing or waiting out the uncertainty, will determine how much of that opportunity materialises.