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Occupational hazard

July 4, 2007 10:00 by



hotels

When Dubai’s hotel industry began totting up the numbers this year, one graph stood out amid the usual success stories: the one showing an 8.5 percent decline in the occupancy rate, according to a report compiled by the Department of Tourism and Commerce Marketing (DTCM). Reasons given ranged from the cancellation of the Dubai Shopping Festival to the Soccer World Cup in Germany and even to the holy month of Ramadan. But despite the setback, hopes were floated for better revenues by year-end.

Seen in the broader perspective of the industry’s performance in the Gulf as a whole, the decline looks like an aberration. Deloitte’s Middle East Performance Review (Summer 2006) says hotel performance across the region has continued to exceed expectations. “Revenue per available room (revPAR) for the first quarter of 2006 was up 10.7 percent compared with the same period last year. However, despite strong growth, there are some signs that hotel performance is starting to slow and that the industry is yet to face some of its biggest challenges,” the report said.

According to the report, during the first quarter of the year Dubai continued to be the top performing Middle Eastern market in terms of both occupancy and average room rates. “While occupancy dipped slightly to 87 percent in Dubai compared to the same period in 2005, average room rates soared 18.6 percent. At $286, the average room rate here is among the highest in the world, bypassing other first class destinations such as New York, London and Paris,” it said. Another report by the UN World Tourism Organization (UNWTO) says that the travel and tourism sector in the region will generate 544 billion dirhams ($148 billion) in 2006, creating nearly 5 million jobs and 10 percent of all employment in the region.

Feeder markets

Craig Senior, the regional director of Middle East sales and marketing of Rezidor Hotel Group, believes that occupancy levels are still running high in the year to date despite a slight drop during the summer months. “Two main reasons can be found for this, firstly the World Cup was being staged in June, so the main European feeder markets for Dubai slowed during this period, and secondly, every year the hotel inventory increases year after year in Dubai, plus this year many serviced apartments have entered the market capturing the GCC family traffic,” Craig said, adding that the last two months of the year are looking very strong for the region. “For Dubai in particular the months of November and December are already showing positive growth,” he said.

The DTCM maintains that the fall in occupancy in the first quarter of 2006 can be attributed to the sudden death of Sheikh Maktoum bin Rashid Al Maktoum and the war in Lebanon. “The effect cascaded down to the second quarter and was compounded due to uncertainty over the war in Lebanon. The occupancy levels gained momentum in the third quarter with an increase of 2.3 percent compared with the corresponding period last year,” said the department, whose responsibility is planning, supervision and development of the tourism sector in the emirate. According to the department, the number of hotel guests between January and September 2006 went up by 4 percent compared with the corresponding period in 2005. “This growth was reflected well in the revenues which rose by 14 percent for the same period,” said Mohamed Abdul Mannan, of DTCM’s media relations.

Pricing and supply

Overpricing is increasingly being blamed. Simon Lewis, the general manager of eVentures Group, said, “As hotel prices continue to rise against limited availability, business and leisure travelers are seeking alternative accommodation such as corporate apartments, private villas and furnished apartments.” According to him, most properties are still enjoying high occupancy rates compared with other parts of the world and therefore while there may be indications of a decline the market still remains very buoyant. “Other factors might be the dominance of construction happening around the various hallmark properties combined with difficulty of traveling to and from hotel locations and the general disrupted environment,” he said. Simon maintained that traditionally the winter/spring season of festivals, exhibitions and shopping festivals bring in the business and make up for any losses that may have been incurred earlier in the year. eVentures is Emirates Group’s business development think tank and its role is to enhance individual group operations.

The balance between supply and rates are also at issue. Some see an oversupply of budget hotels as counterproductive in the long term. Speaking to Gulf News, Toufic Tamim, the vice president of Middle East sales and marketing of M



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