Dubai’s mid-market hotels maintained comparatively higher occupancy than those in the premium sector in H1 2026 as regional airspace disruption and heightened geopolitical uncertainty weighed on hotel demand, says leading real estate advisory and property consultancy, Cavendish Maxwell.

Hotels in the Upper Midscale category secured the highest occupancy rates at nearly 66%, while Midscale properties recorded rates of almost 64%. By contrast, 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 was 56% from January to June, down 30% on the same time last year. However, the annual decline has narrowed since April, with targeted promotions and staycation campaigns boosting hotel demand among domestic travellers in recent months. Cavendish Maxwell expects occupancy to continue to recover during the rest of the year as international travel is expected to take off again.

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.”

Average Daily Rates

The Average Daily Rate (ADR) across Dubai hotels was AED701 in the first six months of 2026, a fall of 7% on the same period last year, according to Cavendish Maxwell’s report. This relatively contained decline, compared with the sharper 30% decrease in occupancy, suggests that operators prioritised rate preservation over volume and avoided aggressive discounting to stimulate demand.

Luxury hotels commanded the highest room rates despite a 6.2% decline year-on-year. Upper Upscale properties were the most resilient, with ADR easing by 2%. Cavendish Maxwell expects ADR to range from AED600 to AED675 by the end of the year.

Openings and closures

Three new hotels opened in Dubai during H1, but the additions were offset by the closure of some properties, resulting in a small reduction in overall hotel supply. By mid-2026, Dubai’s hospitality market comprised almost 152,140 rooms across 727 hotels – a reduction of 0.3% and 1% respectively compared with year-end 2025. The data includes establishments that temporarily closed during H1 for renovation or refurbishment and are currently offline.

Around 3,150 rooms are scheduled for delivery by the end of 2026, bringing the total supply to 155,300 and adding further inventory as demand recovers. The pace of absorption of this new supply will be key in overall hotel performance during the rest of the year, says Cavendish Maxwell.

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

Room classification

Most of Dubai’s hotel supply continues to be in the premium segments – Upscale, Upper Upscale and Luxury – which collectively accounted for almost 70% of all rooms in H1. Upscale had the biggest share at almost a quarter of rooms, Upper Upscale commanded almost 22% and the Luxury segment 21.5%.

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

Cavendish Maxwell added that while the premium segment’s domination highlights Dubai’s position as a luxury travel destination, it also means a larger proportion of the market is exposed to fluctuations in travel demand and air connectivity.

Hospitality sector outlook

Cavendish Maxwell’s report concludes that restored international air connectivity is expected to remain the principal driver of Dubai hospitality sector’s recovery, with carriers that suspended or reduced services to Dubai during H1 2026 scheduled to resume operations in H2.

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.

Download the full report here .