Dubai's decline in hotel rates is likely to make it much more attractive as a tourist destination and broaden its appeal, analysts say. With average room rates above $300 and most hotel offerings at the five-star end of the market, Dubai was priced out of the budgets of many travellers. A combination of new hotel rooms, more budget options and the global economic crisis means Dubai is much more affordable.
"Dubai is maturing," said Tracy Baron, the senior manager at the consultancy Deloitte for tourism, hospitality and leisure. "With the supply of rooms being mixed in three, four and five stars, it makes Dubai a lot more affordable. It's not cheap. But it's a lot more attractive for tourists. "Dubai was a stage where it grew too fast and too rapidly. Everybody wanted to come here. There were not enough hotels, which meant you could charge whatever you wanted and people would come.
"2009 has been a tough, tough year. There has been a lot of supply coming into the market and competition has been rife." Ms Baron said the fourth quarter was positive for Dubai as occupancy levels started to improve. In December, occupancy levels were actually up, to 71.9 per cent from 64.3 per cent in December 2008, although room rates fell. Average daily rates were down to US$244.32 (Dh897.38) from $324.02. "Going forwards, we have to see what Dubai can do to continue growing its tourism and hotel performance."
Travellers will also benefit from the thousands of rooms that are expected to open this year, as hotels planned during the boom become ready for guests. "The hotel operators have to work harder to get the occupancies and maximise their rates. By doing that they're trying to offer packages and promotions to the end user: the tourist. Overall, this is positive news for Dubai. We've still got a long way to go, but the fourth quarter is a good sign," Ms Baron said.
Dubai is also becoming more attractive as a conference destination as the prices of accommodation become more competitive, according to Deloitte. Frederic Bardin, the senior vice president at the Dubai-based conference organiser Congress Solutions International and the travel agency Arabian Adventures, said the long-term prospects for Dubai were good because of its investment in infrastructure, in particular the launch of the Metro and the city's increasing number of budget hotels. He said this had been instrumental in the decision to bring the World Diabetes Congress to the emirate next year.
"They did not select Dubai for their past congresses because the city did not have enough budget accommodation or public transport," Mr Bardin said. I'm not saying we have enough budget accommodation, but we have certainly put a foot in the right direction and there are a number of international brands that have started to open three and four-star hotels, and that is going to help a lot. We wouldn't have the diabetes congress without that."
But it has been a difficult time for the industry. "European companies, for example, which were trying to lower their costs in the current economic climate, were often opting for cheaper destinations such as Prague and Budapest. Also, there has been a question of companies not wanting to take people to a place like the UAE which is considered as glitzy and glamorous, just as Las Vegas has suffered a lot."
He said Dubai would also need to offer a wider array of hotels to meet its tourist targets. rbundhun@thenational.ae