The Premier Inn budget chain turns a profit in Dubai despite being hampered by an underperforming hotel.
Hotel waits for airport's take-off
The weak performance of a Premier Inn hotel built to accommodate passengers using the delayed Al Maktoum International Airport is hampering the company's performance in Dubai, the managing director says.
Nevertheless, the budget chain still manages to turn a profit in Dubai, he says.
"We do have one hotel that's bringing down the averages overall and will continue to do so until that part of Dubai develops a bit further," said Darroch Crawford, the managing director of Premier Inn Hotels, a regional joint venture between Premier Inn and Emirates Group.
"The first hotel we opened at Dubai Investments Park is a very big hotel and it was built because of the new airport that was coming, because of the new exhibition facility that was coming up there for Dubai, which of course has now been postponed," he said.
"The hotel was built for the future and the future hasn't quite arrived for that part of Dubai as yet. That's clouding the picture a little bit."
The company also has a hotel at Dubai International Airport and one at Dubai Silicon Oasis.
Whitbread, the parent company of the hotel chain, has reported that occupancy in its three hotels in Dubai increased to 55 per cent in the financial year to March 3 compared with 38 per cent in the previous 12 months.
But this increase was attributed to the new hotel at Dubai International Airport, which opened in January last year and has been performing exceptionally well, Mr Crawford said.
"Typically, a budget hotel will run on a high occupancy and a low rate," he said. "But the fact of the matter is it's also a very low-cost business.
"We start to turn into a profit at quite a low occupancy, much lower than a full-service hotel, and the business has turned a profit this year."
Analysts said that while five-star properties tended to need occupancies of at least 60 per cent to break even, budget properties can break even on occupancy levels as low as 45 per cent. "You have a low-cost structure with a low labour cost, so you can have a low break-even point when the hotel is properly designed from the beginning," said Chiheb ben Mahmoud, the senior vice president at Jones Lang LaSalle Hotels in the Middle East and Africa.
Premier Inn is planning to open a hotel next to the Abu Dhabi National Exhibition Centre in September. It is to launch a hotel at Abu Dhabi International Airport next yearand one in Doha.
"We've got some sites on hold at the moment," said Mr Crawford. "We have land in Ras al Khaimah, and in Umm al Qaiwain and another plot in Dubai, but those sites are on hold at the moment until we feel the time is right to develop them."