May 7, 2012 | In: Trivia

How Much Will It Cost to Rent a Room in Dubai’s Underwater Hotel?

I watched today a very nice video on Bloomberg, about a plan to build an underwater hotel in Dubai for a total cost of $120 million. Apparently, that wasn’t Dubai’s first attempt to build an underwater hotel; the HydroPolis hotel that was planned back in 2006 never made it beyond the initial planning phase.

I’m sure that I wasn’t the only person who was curious enough to want to know what will be the rates of this hotel (and the rates of the HydroPolis hotel, for that matter).

So, what are the rates for this underwater hotel?

OK, from what I’ve read, the hotel is planned to cost anywhere between $50 million and $120 million and it’ll have about 40 rooms (half which are underwater). Assuming that the project will go overbudget (which is very normal for these types of challenging projects) by 100% over the maximum planned cost, the final cost of the hotel will be $240 million. Before calculating the daily rates of this underwater hotel, we will also need to know the monthly costs. I expect these costs to be around $1 million (including maintenance costs, and salaries, servicing the debts, inflation-as-cost, and other costs).

Now, usually, for projects in this area, investors expect their capital back in 10 to 15 years. Let’s assume that they want their money back in 10 years. Now we have all the parameters to calculate the rate of a single room in this hotel.

– Step 1: Let’s calculate the total monthly costs: $240 million / 10 (years) / 12 (months) + $1 million = $3 million
– Step 2: Let’s calculate the rate/room (assuming all rooms have the same rate): $3 million / 40 (rooms) / 30 (days) = $2,500

Now, of you might be thinking that the above cost is the cost to break even, you’re right, but that’s breaking even in 10 years. After the 10 years are over, if the room price is still the same (it’ll most likely be more), then the only costs will be the maintenance costs (actually less than that because all the debts will be paid out by then), then the break even rate for the room will be about $833.33 ($1 million / 40 (rooms) / 30 (days) = $833), which means that each room will be making about $1667/day, which means that the hotel will be netting $24,338,200/year (there are no taxes in Dubai by the way).

Yes, I’m assuming full occupancy in my calculations but I’m sure that any couple in the world will want this experience, at least once in a lifetime.

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