Room rates in Dubai see drop of up to 30%

Four- and five-star hotels in the emirate have cut room rates between 10 per cent and 30 per cent.

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Hotel room rates in Dubai are beginning to dip as the economic crisis bites into spending in the leisure and business sectors, industry insiders say. Four- and five-star properties in the emirate have cut room rates between 10 per cent and 30 per cent, Aloke Dey, the manager of Sharaf Travel Holidays, one of the largest Dubai-based tour operators, said yesterday. "Right now, we are finding that there is a lot of availability and hotel prices are so much lower than last year."

Avtar Singh, the director of operations at Lama Tours, also based in Dubai, agreed. "Our business right now is a lot slower and bookings are down by at least 10 per cent. I think that people are really starting to cut back on their spending because of the crisis, even after hotels have slashed their rates." He said many Dubai hotels had removed their surcharges. "This is basically an extra fee that hotels charge guests for air conditioning, Wi-Fi and other room facilities and it's a hidden charge that many guests don't know about," said Mr Singh. "But once you remove it, the room rate drops by about 10 per cent, which is what is happening now."

Among the hotel operators Lama Tours deals with is the Jumeirah Group, the Dubai-based luxury chain, which Mr Singh said had reduced its rates by 10 per cent from last year's levels. A spokesman from the Jumeirah Group said in an e-mailed statement that most of the chain's Dubai hotels were enjoying occupancy rates of 90 per cent and above. "We have very sophisticated yield management systems that enable us to be flexible with rates, depending on demand. Our rates do adjust automatically according to supply and demand and so far our rates and occupancy levels for the festive season are holding up very well," the spokesman said.

However, the evidence of declining occupancy and room rates was revealed last month, when Smith Travel Research (STR Global), a US-based industry consultancy, released its monthly Middle East report for September. Overall, it found that Dubai occupancy rates had fallen 4.2 per cent and revenue per available room was down 8.8 per cent. STR Global's report found that occupancy rates throughout the Middle East had also suffered from the financial crisis, dropping 5.3 per cent to hit 63 per cent.

"The situation is getting really serious and I think we will start to feel prices drop even further in the coming two to three months," said Mr Dey. Some hotel groups are already feeling the impact of lower reservations. "It is common knowledge that the first quarter of 2009 is presently on a soft side," said Olivier Louis, the general manager of the One&Only Royal Mirage in Dubai. "This is being highlighted by the international travel trade [business] and witnessed by lower reservations for all of Dubai, if compared with the same period last year." Mr Louis said One&Only's hotels in Dubai - which include The Palace, Arabian Court and The Residence & Spa - were fully booked for the Christmas and New Year period. Beyond those holidays, however, he said the outlook was not positive.

"The dramatic, swift exchange-rate turmoil from key markets such as the UK pound, which lost 25 per cent to the dollar and 26 per cent to the euro, are making our destination not so attractive as in the past," Mr Louis said. "It is also obvious that corporate groups, incentive groups are seriously down from last year. Major international and Dubai-based travel operators have registered cancellations. Most financial institutions, real estate firms, automobile groups have had to reassess their annual meeting plans."

As a result, the company is planning to launch packages and rates that Mr Louis hopes will offset the financial downturn and boost business. . Gee Chidac, the general manager of the Radisson SAS in Sharjah, started introducing value-added deals last month to support occupancy levels. "Our occupancy level right now is 100 per cent, mainly because we are offering special deals, which include discounts in our restaurants and other family package deals that really encourage people to come," said Mr Chidac. "Dropping prices is not the right way to deal with this problem because bringing the rate back up will be very difficult." The average room rate at the hotel is Dh1,000 (US$272).

In Abu Dhabi, the results of the slowdown are still not being felt by hotels. "Our occupancy rates have been about 89 per cent over the past couple of months and are still looking good," said Shady Nikola, the director of rooms at Rotana Hotels and Resorts. "Business tourism is still very strong here and I don't expect it to slow down as long as people come here for business meetings. In the coming months, we even plan to increase our rates." He declined to say how much rates would be increased.