Our Blog
Articles from real estate market
Ras Al Khaimah (RAK) is emerging as a highly attractive destination for hotel investors, offering strong potential returns driven by increasing tourist demand, strategic development initiatives, and the availability of prime beachfront plots. This overview explores the return on investment (ROI) potential for hotel development in RAK, focusing particularly on new projects like the Wynn Al Marjan Island Resort.
Key Assumptions for ROI Analysis
The ROI analysis for hotel development in RAK is based on a hypothetical 200-room upper upscale beach resort. Key financial metrics include:
- Average Daily Rate (ADR): USD 232
- Revenue Per Available Room (RevPAR): USD 167
- EBITDA Margin: 36%
- Site Acquisition and Construction Cost: USD 62.48 million
- Equity Internal Rate of Return (IRR): 16.3%
These assumptions are based on market conditions where the hotel is operated by an international brand, employing a 50:50 debt to equity ratio, and considering stabilized operations.
Market Dynamics and Performance
RAK's hospitality market primarily consists of internationally branded resorts and city hotels, catering largely to leisure tourists. The market has shown resilience, with stable occupancy rates around 72% in 2022. This stability is attributed to effective management during the COVID-19 pandemic and the emirate’s appeal to both domestic and international visitors.
The Wynn Al Marjan Island Resort, set to open in late 2026, is expected to significantly boost RAK's tourism profile. This major project, costing over USD 2 billion, will feature more than 1,200 hotel rooms, extensive retail and dining spaces, and large gaming facilities. As the first integrated resort in the region, it is anticipated to attract a high volume of visitors and increase overall demand for hotel accommodations.
ROI Analysis and Investment Potential
The financial analysis indicates promising returns for investors:
- Equity IRR: 16.3%
- Equity Cash-on-Cash Return: 21.7% (based on average annual EBITDA after interest payments)
These returns are competitive within the UAE, positioning RAK as a lucrative market for hotel investments. The combination of rising tourist numbers and strategic infrastructure investments supports a positive outlook for future profitability.
Future Opportunities and Market Growth
RAK aims to attract over 3 million visitors annually by 2030, leveraging its natural attractions, cultural heritage, and new hospitality projects. The introduction of high-profile developments like the Wynn Al Marjan Island Resort is expected to be a major catalyst for market growth. This project will not only boost tourist numbers but also set a precedent for future investments in unique and diversified tourism offerings.
Potential areas for investment include mid-market resorts, branded residences, lifestyle dining and entertainment outlets, and eco-friendly concepts focused on sustainability. As demand continues to grow, these new developments will fill gaps in the market, ensuring a diverse and comprehensive tourism offering.
Conclusion
RAK’s hotel market offers strong investment returns, driven by solid demand, strategic developments, and competitive financial metrics. The emirate’s proactive approach to enhancing its tourism infrastructure and attracting high-profile projects like the Wynn Al Marjan Island Resort ensures a robust growth trajectory. Investors can expect high returns and long-term profitability, making RAK a highly appealing destination for hotel investments.