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The off-peak year, Part I
Caught in the midst of infrastructure overdrive and global slowdown, the region’s tourism sector will be forced to find new revenue streams to survive the lean times, Part I.
August 10, 2009 8:20 by Ehtesham Shahid
Correction time. The sector is still nervous, though – awaiting good news with bated breath even as short-term projections spread further gloom. Independent observers are revising tourist target numbers in places such as Dubai. “The 10 million visitors by 2010 [in Dubai] is not achievable in the current climate. However, it will be by 2013 once the global economy recovers and developed countries’ growth stabilizes, leading to improved consumer confidence,” says Caroline Bremner, the global travel and tourism manager at Euromonitor International. The source of tourism dollars is still not being properly tapped. The United Kingdom will continue to be the region’s leading source market, whereas key alternative source markets with emerging middle classes remain negligible, even as China, Brazil, Eastern Europe and Latin America offer long-term potential, according to Euromonitor.
Government support notwithstanding, hotel occupancy rates have been falling significantly in Dubai – to 73 percent in the first quarter of 2009 from almost 90 percent last year (according to one estimate). To tide over this situation, different players are trying different prescriptions. “First we launched a 20 million savings campaign in our net profit line,” says Marko Hytonen, the area vice president for the Middle East and Egypt at Rezidor, the multi-brand hotel management company. His company then followed up with another initiative to save 10 million more so as to stay in line with the drop in revenues. “It has been a bit of a corporate diet. We still keep the muscle but we trim the extra fats,” Hytonen says candidly.
Rezidor’s biggest drop has come about in Dubai. “During the first quarter we have lost 36 percent in revenue per available room in Dubai,” he says, and the average house rates have also definitely decreased in the city. “It definitely is correction time, there is no question about it.” Rezidor currently operates in 20 countries, has 5,000 hotel rooms in operation and is in the process of adding another 5,000 rooms and 18 hotels over the next five years.