x Abu Dhabi, UAETuesday 23 January 2018

UAE tourism lures big players

The rapid expansion of the tourism industry in the UAE will force companies to raise standards and keep prices in check as competition increases.

The aviation sector has become increasingly competitive in tandem with the rapid expansion of the tourism industry in the country. Jeff Topping / The National
The aviation sector has become increasingly competitive in tandem with the rapid expansion of the tourism industry in the country. Jeff Topping / The National

The rapid expansion of the tourism industry in the UAE will force companies to raise standards and keep prices in check as competition increases.

The growth of the airline sector is a prime example of this, analysts say, as home-grown carriers expand services and compete among themselves and with major international carriers, which are also adding more capacity.

"Those that have the better service, better connectivity, better timings and performance will gain that market share," said Sunil D'Souza, the UAE country manager for Kanoo Travel.

Mr D'Souza said Qatar Airways, Etihad Airways and Emirates Airline were already taking some share from other regional and international airlines, helped by a "customer-centric" attitude and competitive rates.

"Other legacy carriers, like British Airways, Cathay Pacific, Air India or other carriers, they've also increased their frequency and flights. It is those who have kept customers happy who will thrive."

Similarly in the hotel sector, with new properties opening, the market is expected to become increasingly competitive, particularly in Abu Dhabi.

By the end of the year, several hotels are expected to have opened in the capital, including the Park Hyatt and St Regison Saadiyat Island, as well as Sofitel and Rocco Forte hotels elsewhere.

Room rates are expected to fall because of the additional supply.

Abu Dhabi has the largest expected room growth in the region, up 90.3 per cent on the existing number of hotel rooms if all 13,534 rooms in the development pipeline open, according to STR Global, a hotel industry researchcompany based in London.

It would be easy for hotels to enter fierce price wars as they compete for business, analysts say.

"It's a phenomena that any industry goes through when you have supply and demand," said Henning Fries, the regional vice president, UAE, for Fairmont and the general manager of the Fairmont Bab Al Bahr hotel in Abu Dhabi.

"How that all works together and if there's an equilibrium, and if there's a disconnect between them, then that always has an effect on the price - either in a positive way for the consumer or in a negative way for the industry."

With luxury brands such as Fairmont it was difficult to drop rates below a certain level, he said.

"We would never go and undersell our brand.

"We would harm ourselves permanently if we were to do that. Other operators may take a different approach.

"Other competitors might see it the same way as we do," said Mr Fries.

But there are others, he said, who want to ensure they don't have empty rooms. "Of course if demand is not increasing as fast as supply is, it will have an effect.

"If customers know there is a lot of supply to choose from it will always have an impact on price naturally."

Albert Dias, the co-founder of Musafir.com, an online travel agency based in the UAE, said there was growing evidence carriers in the country were trying to attract passengers from different emirates more actively, with the addition of additional bus services for example.

Etihad has also just launched a free chauffeur service for friends or family flying economy on major routes and living in Dubai, Sharjah or Al Ain.

"There's increasing willingness to reach out to passengers in different parts of Dubai," said Mr Dias.

"On the flip side we've also seen Emirates talking far more than they ever have before about picking up customers from Abu Dhabi and Al Ain and bringing them into Dubai." Air fares this year had increased by about 10 to 15 per cent compared with last year, he said, partly because of the rise in fuel prices.

But competition would help to limit rises in fares.

Overall, demand for air travel is growing strongly.

Passenger traffic for carriers in the Middle East increased 8.3 per cent in the first seven months of the year, while capacity grew 9 per cent, despite the regional unrest, according to the International Air Transport Association.

"There are more and more companies travelling frequently, more and more customers travelling frequently, more and more families taking vacations frequently," said Mr D'Souza.

High oil prices meant airlines would struggle to cut fares.

"When the oil price goes around $120 a barrel and beyond, it puts tremendous pressure on airlines.

"That is when they come up with measures like increasing the prices."

There are other pressures too. James Hogan, the chief executive of Etihad, hit out at the EU's Emissions Trading Scheme last week, which he described as a "revenue-generating tax" that essentially exploited environmental concerns.

rbundhun@thenational.ae