x Abu Dhabi, UAEWednesday 17 January 2018

Hotels continue to reduce rates

Weaker demand coupled with more hotel rooms becoming available in Dubai had forced hotels to cut rates heavily.

Hotels continued to feel the pressures of the economic downturn last month, according to new data. Weaker demand coupled with more hotel rooms becoming available in Dubai had forced hotels to cut rates heavily to try to attract guests, hitting the emirate particularly hard, analysts said. "Because of the drop in occupancy there has been a bit of a panic on board and there have been massive rate cuts and promotions going on and packages," said Jalil Mekouar, the executive vice president for MENA at Jones Lang LaSalle Hotels.

In Dubai, occupancy levels fell from 75.8 per cent in June last year to 64.6 per cent last month, a 14.8 per cent fall, while average room rates dropped 22.4 per cent from Dh786.85 (US$214.18) to Dh610.44, according to data from STR Global. As a result, revenue per available room (RevPAR), the key industry indicator, was down by more than a third in Dubai, from Dh596.18 to Dh394.05. Last month, Starwood's Westin and Le Meridien Mina Seyahi beach resorts, which are part of the same complex at Jumeirah Beach, laid off 90 members of staff. A spokeswoman from the Westin said: "We're probably one of the last hotels to look at their structure. Obviously summer is always a difficult time here in Dubai. With market trends over the summer it was something that we felt we needed to do. We have relatively strong occupancy but our yield from a price point of view is not there."

Starwood has 20 hotels in the UAE. Fifteen of these are in Dubai, four are in Abu Dhabi and one is in Fujairah. The US company's second-quarter earnings report, released at the end of last week, showed its revenue per room for its Middle East and Africa hotels fell 19.9 per cent in the quarter compared with the same period last year. The Brussels-based hotel management company Rezidor reported a similar decline in business. It said in a report that the UAE in the second quarter "was the key Middle East and Africa market with the most significant RevPAR decline, down 40.5 per cent, as a result of lower leisure individual and group volumes".

Rezidor has three hotels in Dubai and one in Sharjah, and is due to open two hotels on Yas Island in Abu Dhabi later this year in time for the Formula One event in November. Analysts said Dubai's hotel performance was likely to be weak throughout the summer. "I don't see any improvement," Mr Mekouar said. Alex Kyriakidis, the global managing partner at Deloitte Tourism, Hospitality and Leisure, said that some off-beach hotels in Dubai were likely to experience occupancy levels as low as 30 to 35 per cent as the beach hotels lured customers with aggressive discounting.

In Abu Dhabi, hotels showed signs of strain, but still managed to outperform the global market considerably because of the limited stock of rooms in the capital. Occupancy in Abu Dhabi was down just 7.2 per cent, from 79.9 per cent in June last year to 74.1 per cent last month, STR Global said. Average room rates were down just 0.7 per cent from Dh850.04 to Dh844.10. Revenue per available room in the capital fell as a result by 7.9 per cent, from Dh679.24 in June last year to Dh625.75 last month.