x Abu Dhabi, UAEFriday 19 January 2018

Occupancy rates to fall steeply

Hotel occupancy rates in the UAE are likely to dip sharply in the next six months as travellers continue to be hit hard.

Impossible: hoteliers said that reducing room rates would be more harmful to business because increasing them back would be difficult.
Impossible: hoteliers said that reducing room rates would be more harmful to business because increasing them back would be difficult.

Hotel occupancy rates in the UAE are likely to dip sharply in the next six months as travellers continue to be hit hard by the economic slowdown, industry officials said. Hotel occupancy rates in the Middle East fell 5.3 per cent to 63 per cent last month, according to the latest report released by Smith Travel Research (STR Global), a US-based industry consultancy. However, average daily rates (ADR) and revenue per available room (RevPAR) continued to increase by 14.3 per cent to reach US$141.92 (Dh521) and 8.3 per cent to $89.34 respectively. "The latest data sees us following the similar pattern of the year, with occupancy levels falling as demand falls, without this translating into a drop in rates," said James Chappell, the managing director of STR Global. "Whereas at some stage this would seem inevitable, the industry seems to have learned from previous cycles that discounting in and of itself is not enough to stimulate demand and is, in most cases, counterproductive." The report said that Dubai fell 4.8 per cent in occupancy, declined 4.2 per cent in ADR and dropped 8.8 per cent in RevPAR. "I think that the economic slowdown will last for about two years from now, but it might take a longer time for the UAE to recover from a decline in occupancy because of the added supply of rooms coming into the market," said Hala Choufany, an analyst with HVS, an international hospitality consultancy based in Dubai. "And over this period I expect that room rates will drop about 25 per cent in all of the emirates." Earlier this month, some hoteliers said that reducing room rates would be more harmful to business because increasing them back to their current levels would be impossible. However, Ms Choufany disagreed. "Overall, I think what's happening to the industry is very positive because this country is in need of a correction and in many cases a lot of hotels have been overcharging," she said. In contrast, Cairo posted positive results in all three categories, rising 1.6 per cent in occupancy, 7.5 per cent in ADR and 9.2 per cent in RevPAR, according to the report. "Travel is not [a necessity], and at a time of an economic crisis everyone is looking to spend less on hotels. This puts Egypt at the top of the list for many travellers because prices here are still very competitive," said Elhamy el Zayat, the chief executive of Emeco Travel, one of the largest travel agencies in Egypt, and former head of the Egyptian Tourism Federation. The Asia-Pacific region recorded the biggest fall in occupancy, dropping 12.4 per cent to 61.3 per cent. However, the region maintained a 4.4 per cent growth in ADR to reach a RevPAR of $134.75. In the Americas, occupancy rates fell 5.7 per cent to 61 per cent, while Europe posted a 4.9 per cent drop to 74.3 per cent. Data for the report was gathered from more than 36,150 hotels worldwide, comprising 4.93 million guest rooms. abakr@thenational.ae