Dubai hotels face challenges as summer heats up

The latest figures for occupancy rates of hotels across the emirate this year certainly cannot be considered alarming, especially considering the global economic climate.

Occupancy rates in Dubai for the first six months of the year were 85.5%, a 0.6% drop compared to the same period last year.

Average daily room rates climbed 11.3% to $349, according to hospitality research firm STR Global.

For the month of June alone, occupancy rates were 79.6%, a 2% drop from the same month last year, while the average daily room rate climbed 8.2% to $218.

For the first 20 days in July, the occupancy figure is 74.82%, compared to 74.72% in July 2007.

Hotels offer deeper discounts

However, other analysts say they are seeing signs of deeper discounts and lower occupancy levels than in past years.

'Every year we see a slowdown in June. However this year it did not seem to be so bad. Now it appears that the slow down is happening later this year in July,' says John Podaras, Operations Manager at TRI Hospitality Consulting.

One indicator that this summer has been slower than usual is that The One & Only Royal Mirage is offering discounts, which is unusual for the hotel because even after 9/11 it refused to drop its rates, he noted.

Other hotels that appear to be impacted this summer are Grand Hyatt and Raffles, which are down about 40% and 25%, respectively, based on anecdotal evidence.

One issue for Raffles is that it is still searching to find its core market. 'Raffles is trying to position itself at the very highest end of the Dubai market, so they are essentially competing head to head with the Burj Al Arab. Time will tell if they need to lower their rates,' Podaras says.

However, lowering their rates might not be an option for the hotel, as the chain has a global policy in terms of pricing.

Slowdown due to travel pattern changes

Most travellers to Dubai during the summer months are from the GCC and Europe, so if there a slowdown in July it is because these groups are travelling here less.

'There is some evidence to suggest that Saudis are increasingly travelling to Thailand and the Far East. The reason for that is they are looking for something new and different,' says Podaras.

'Every year Dubai has the same summer attractions. Dubai Summer Surprises is getting a bit old. Dubai needs to reinvent itself in order to attract summer visitors.'

For Europeans, the decision about where to travel has more to do with price. 'People's travel budgets are getting tighter, so they are doing more local travel or choosing less expensive destinations,' Podaras says.

Business travellers continue to be a huge market for Dubai hotels. 'Business travel is still strong and that represents about 50% of the hotel market here. However, holiday travellers are far more sensitive to price, and if they can find a five star hotel somewhere else that is cheaper than a four star hotel in Dubai, they will pick the five star hotel.'

'Occupancy rates go in waves'

One general manager sees the situation as a slight cyclical downturn. 'Two years ago we were price sensitive, last year we were not, this year we are again,' said Mike Scully, Complex General Manager, Le Meridien Mina Seyahi Beach Resort & Marina and The Westin Dubai Mina Seyahi Beach Resort & Marina. 'It goes in waves.'

When asked whether the credit crunch or high oil prices are reasons behind the slowdown this year, Scully said it is too early to tell because many travellers booked their summer travel before these crises came about. 'It will be more telling in October,' he said.

One possible reason for a slowdown among Dubai hotels is that it is harder to book flights to the emirate because seats are increasingly being filled by travellers who are not staying in Dubai but instead are flying on to other destinations.

Another reason why occupancy may be down is because there is a larger supply of hotel rooms in the emirate.

Fourteen new hotels with a total of 1,605 rooms have opened this year, according to the Dubai Department of Commerce Marketing.

However, Scully remains upbeat about the performance of his hotels so far this summer. The Westin, which opened in May, recorded 73% occupancy in its first month, and is now in the 50%-60% range, which is good for a hotel which is only a few months old, he said.

Le Meridian's occupancy rate was at 95% in May, and is in the high 80s at the moment, which is typical for the hotel. However, he acknowledged that the hotel has offered discounts this summer.

'The Mina Seyahi is one of the most recognized hotels in Dubai, our beach and our bars are well known. We do a lot of business with people who live here,' he said.

'Some hotels market themselves to Europe, or Russia, or the GCC only. We try to spread ourselves across all markets.'


See also:
Middle East tourism to soar despite global economic gloom
Travel industry has yet to feel the impact of high oil prices