Hotels open to new ideas as occupancy rates fall

Dubai hotels explore all the angles for new business this year as more direct competition springs up.

Dubai hotels suffered sharp drops in occupancies and revenues last year, but managers are exploring all the angles for new business this year as more direct competition springs up. Occupancy levels in Dubai fell to 69.4 per cent last year from 77.2 per cent in 2008, while average daily rates were down to US$235.48 (Dh864) from $308.51, STR Global reported.

This resulted in a 31.4 per cent fall in revenue per available room (REVPAR) to $163.31 from $238.19, the largest fall in the Middle East and Africa. "We're still feeling the pinch of the economic downturn," said Syed Zulfiqar Mehdi, the director of sales at the Samaya Hotel in Deira. "There is a decline in demand for rooms, and a lot of new hotels have recently opened and therefore caused an imbalance in supply and demand."

Hotels across Dubai have responded by launching promotions, looking to new markets for business and cutting costs. Rates and occupancies have come down from their high levels before the global downturn. Analysts have said that as new hotels planned during the boom times in Dubai continue to open, there was likely to be further pressure on rates. "Difficult times require difficult measures," said Naeem Darkazally, the area director of sales and marketing for Rotana Dubai and Northern Emirates. Rotana has 11 hotels in Dubai, with a total of 3,300 rooms.

"We have gone very aggressive," he said, adding that Rotana was aiming to achieve 100 per cent occupancy during the Dubai Shopping Festival, which launches today. "We are putting a lot of money into promoting in the near and Far East." Mr Darkazally said the hotel was tapping new markets for business as economies in the UK and other European markets, long Dubai's key source of tourists, remained weak. "I must always find ways of creating new demand. If hoteliers believe they could do what they did last January, it won't work."

Rotana recently opened the world's tallest hotel in Dubai, the Rose Rayhaan. It also plans to open its first budget Centro hotel in Barsha within weeks. Mr Mehdi said that Samaya Hotel had tried to counter the downturn by attracting more groups from companies to conduct training and seminars. Last month, there was a 15.6 per cent drop in REVPAR in Dubai to $175.69, STR reported. REVPAR, the benchmark measure for the industry, is a combination of room rates and occupancy levels. Average daily rates were down to $244.32 from $324.02.

But occupancy levels were actually up to 71.9 per cent from 64.3 per cent in December 2008. Mr Darkazally said that the low occupancy levels that month, however, were largely due to the timing of the holidays, which caused a drop in demand from business travellers. The Middle East and Africa region's occupancy rate dropped 10.9 per cent last year to 62 per cent. Average daily rates decreased 2.7 per cent to $153.91 and REVPAR dropped 13.3 per cent to $95.44.

One bright spot was Beirut, where occupancies rose 27.5 per cent to 70.9 per cent, with average daily rates increasing 27.2 per cent to $205.23 and REVPAR up 62.1 per cent to $145.53.