x Abu Dhabi, UAESunday 21 January 2018

Luxury puts pressure on old hotels

Ageing, low quality hotels in Abu Dhabi will have to refurbish or risk going out of business.

The City Seasons Al Hamra Hotel, which is undergoing renovation, is scheduled to reopen in September. Rich-Joseph Facun / The National
The City Seasons Al Hamra Hotel, which is undergoing renovation, is scheduled to reopen in September. Rich-Joseph Facun / The National

Up to 4,000 hotel rooms, or a fifth of the total in Abu Dhabi, need to be refurbished or closed as the capital prepares for a wave of new luxury properties.

Lawrence Franklin, the director of strategy and policy at the Abu Dhabi Tourism Authority (ADTA), said that closing or refurbishing many older, shabbier hotels was essential.

"Refurbishment or retirement of stock at the bottom end of the market is seen as part of the healthy evolution of our portfolio, which makes a positive contribution to maintaining our overall quality proposition and market positioning," he said.

Abu Dhabi has more than 4,000 rooms in ageing, unbranded hotels and hotel apartments, according to the property consultant Jones Lang LaSalle, about one fifth of the total number of rooms in the emirate.

"Among existing operators, responses to new entrants may vary, from keener pricing to property refurbishment, a change of use such as change to permanent accommodation or, in some cases, closure and redevelopment," Mr Franklin said.

He added that one small hotel apartment property in the capital had already closed this year and that it was largely one and two-star properties that were being affected.

Mr Franklin declined to name the hotel that closed.

Meanwhile, Santosh Rai, the group general manager of the Abu Dhabi company Ramee, whose holdings include four ageing hotels, acknowledged that if the standards of those properties were not raised, potential guests who had a choice would simply go elsewhere.

"It's survival of the fittest," said Mr Rai. "We have to upgrade our hotels due to the competition in the market. We should have all the facilities, only then we can survive. We should have a gym, we should have parking, we should have health clubs. [Only] superior hotel apartments will … survive in this market now."

But he said that the lack of parking in the area was proving to be a major issue for his properties and that this was down to the authorities to solve.

The hotels were also likely to reduce their prices to compete, he added. "We have to do something with the rates. Of course you have to compromise some areas where we can lower the prices."

Thousands more rooms are expected to open over the next year.

Mr Rai said Ramee hoped to refurbish the hotels, conceding that the consequences could be terminal for an old hotel that did not raise its standards.

"Then you will lose your business," Mr Rai said. "Clients will go somewhere else. We are facing tough competition in the market."

The cost of completely refurbishing lower-quality hotels in the capital could run into hundreds of millions of dirhams. For many owners, it is not an affordable option.

The City Seasons Al Hamra Hotel, housed in a 16-year-old building, is one property that has decided to make the changes necessary and is undergoing a refurbishment and extension costing up to Dh90 million (US$24.5m). The hotel has already refurbished most of its rooms and closed last month to begin renovations on the ground and mezzanine floors and to complete the extension. Its reopening is planned for September.

"There is a demand for hotel rooms of a higher standard," said Mohamed Sodki, the general manager of the Al Hamra. "We are working to have a higher standard to be able to compete with the rest of the new hotels."

Mr Sodki said those unable to raise their standards were likely to be "phased out".