Dubai hotels report cancellation rates of up to 25 per cent as tour operators organising package trips for Indians to the UAE grapple with the weak rupee. (But one hotel has a silver lining: Shah Rukh Khan.)
Weak rupee dents Dubai tourism
"It's the tour agencies that are taking the hit - lots are cancelling their packages," said Russel Sharpe, the chief operating officer of the hotel division at Landmark Hospitality, which operates two Citymax properties in Dubai. "We have had a 25 per cent reduction in group business."
The rupee has lost about a third of its value against the US dollar in the past two years - and its decline has accelerated since the start of May, with the currency reaching a record low of 68.825 yesterday.
Tour operators make bookings in advance and make an initial down payment of between 50 and 70 per cent of the price. If the currency depreciates before they pay the balance, operators must either absorb the costs or pass them on to customers. Those additional costs may prompt travellers on a tight budget to pull out.
The tour operators are responding by helping clients to stretch their rupees. Lama Group, an operator in Dubai, has revised its packages to make them "more exciting and better value", according to Ravinder Saini, the head of marketing. The company will also start offering three-star accommodation in addition to the four and five-star hotels currently available.
He added that the tax-free shopping available in the UAE still offered good value to Indians and he wanted to shave the cost of accommodation so people would "not have to cut into their shopping budget".
Operators that specialise in organising shopping trips to Dubai have received a separate blow after the Indian government decided to ban the duty-free import of flat-screen televisions.
"Lots of operators sell tours especially for shopping, so we expect that to have a knock-on effect," Mr Sharpe said. Fortune Group of Hotels in Dubai is also poised to revise its packages. By this time of the year, the company has usually unveiled its autumn and winter offers. This year, it is holding off to see whether the rupee recovers.
The depreciation is "the biggest issue facing us at this point in time", said Alok Narula, Fortune's group general manager.
He added that while the group was "well cushioned" it would revise its winter packages "to offer extra value". Offers might include free transfers and in-house meals, which "don't cost much for us but offer guests a feel of Arabic hospitality".
For travellers from India who make their own bookings online, there are still plenty of bargains and the UAE remains an attractive destination. The spare capacity on flights to the UAE is dissuading airlines from increasing prices, according to Tarique Khatri, the senior vice president of business development at Cleartrip, an online travel site. The increased number of hotels rooms also meant there was "a bit of rationality in room prices".
The number of Indians staying in Dubai's hotels climbed 14 per cent to 463,175 in the first half of the year compared with 399,994 during the same months last year, according to Dubai's Department of Tourism and Commerce Marketing. India is Dubai's second-largest source market for tourists behind Saudi Arabia and ahead of the United Kingdom.
Last year, the emirate welcomed 763,986 visitors from India, an increase of 8.8 per cent compared with 2011.
At the luxury end of the spectrum, though, Indians continue to arrive.
At Atlantis, The Palm, business generated by Indians grew at double digits in the first half of the year and the resort has added Indian language speakers to man its toll-free booking line, according to Ravini Perera, the senior vice president for sales and marketing at the resort.
The arrival of the Indian star Shah Rukh Khan at the Atlantis in September for a reported 50-day film shoot is also likely to keep the reservations line ringing off the hook.