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Abu Dhabi, UAETuesday 9 March 2021

Declining revenue hits hotel sector

The hotel sector in Dubai remained depressed last month in what has been a challenging year for the industry.

The hotel sector in Dubai remained depressed last month in what has been a challenging year for the industry. Hotels in the emirate suffered a 35.3 per cent drop in revenue per available room, the key indicator for the health of the sector, the largest decline in the Middle East and Africa region. Revenue fell to US$198.22 (Dh728.06) per available room last month, from $306.27 in October last year, data from STR Global showed.

The downturn in the global travel market and the increased supply of rooms in Dubai were the main reasons for the fall, said Elizabeth Randall, the managing director of STR Global. Some hoteliers and analysts have described these kinds of levels as the new "norm" for Dubai hotels, which had previously enjoyed what were considered unsustainably high occupancies and rates levels. Occupancy levels slipped to 74.9 per cent last month from 81.8 per cent in the same period last year, while average daily room rates dropped 29.3 per cent to $264.73.

Still, there was some cause for optimism. Alex Kyriakidis, the global managing partner for tourism, hospitality, and leisure at Deloitte, said the figures were slightly distorted because the Eid al Fitr holiday was in October last year. "Hoteliers in Dubai predict that the next couple of months are going to be good in terms of occupancy," Mr Kyriakidis said, adding there were many positive factors ahead for the tourism sector in Dubai.

"The slide of the dollar is going to mean that the euro and the pound are stronger," he said. "Last year, the UAE was relatively more expensive [for travellers from the UK and rest of Europe]. Now that is working in the industry's favour." While demand was likely to be robust, new hotel openings would keep rates under pressure, he said. Hotels due to open in Dubai next year include five Movenpick facilities, a Ritz Carlton and the Ottoman Palace.

Four budget Ibis hotels in Dubai this month have been experiencing occupancy levels around the 90 per cent mark after offering a promotional rate of Dh299 per night, said Christophe Landais, the managing director of Accor Hospitality Middle East. Actor has added about 1400 Ibis rooms to the Dubai market in the past year. "The Ibis strategy is really price driven, volume driven," Mr Landais said, meaning it offers low prices to boost occupancy. He said this was profitable for economy hotels because they had lower fixed costs. Accor plans to open another Ibis in Dubai next year. Abu Dhabi hotels were also affected last month, with revenue per available room down 14.8 per cent to Dh966 from the same period last year.

Occupancy levels were down 11.3 per cent to 80.1 per cent and average daily rates were down 3.9 per cent to Dh1,206. The capital's first Formula One Grand Prix helped to keep those declines manageable, Mr Kyriakidis said. Abu Dhabi hotels experienced occupancy and average daily rates of 97.5 per cent and $606 respectively on October 31, the night before the race, as hotels filled up and raised prices for the event, STR Global said.

Mr Kyriakidis said the corporate travel sector was still suffering and cutting back, which was negatively impacting Abu Dhabi. Pressure was likely to continue with Abu Dhabi due to add 4,000 rooms next year. Hotels that opened for business last month in the capital included the seven hotels on Yas Island, the site of the F1 circuit.

Published: November 25, 2009 04:00 AM


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