Budget hotels see opportunity in Dubai market (page 1 of 2)

With some of the most glamorous - and expensive - hotels in the world, such as the Burj Al Arab, Dubai has proudly touted its image as a travel hotspot that caters primarily to wealthy jet-setters from across the world.

However, the emirate is beginning to realize that in order to attract more tourists it needs to diversify its offerings to appeal to a wider scope of travellers, especially in light of the financial downturn.

Dubai has set ambitious targets of attracting 15 million tourists a year by 2015, but analysts have been saying for years that this figure will be hard to attain without more budget and mid-level hotels on offer, said John Podaras, associate director at TRI Hospitality Consulting.

It is hard to say what percentage of hotels in Dubai are in the low to mid-budget category because there are a lot of unbranded hotels in the older parts of town such as Deira, he noted.

However, most experts agree that Dubai has a disproportionately low number of these types of hotels on offer, especially given the fact that tourists are tightening their belts.

'During the Dubai Shopping Festival, hotels should be getting occupancy in the 90s, but we are hearing is that it is in the mid-70s,' Podaras said.

'And what all of them saying is that guests are booking at the last minute rather than months in advance, which is a worrisome trend,' he said.

The beach hotels in particular are really facing intense competition due to the arrival of Atlantis, which brought a huge number of rooms, and the fact that leisure travel is down. Still, it appears that many hotels are resisting offering major discounts, and instead are trying to lure customers with offers of free room nights with a 2-night stay or other packages.

'I sense there are very few hotels, at least along Sheikh Zayed road, that are cutting rates willy nilly just to get people through the door. It's still too early to get into that mode,' Podaras said.

Growth opportunity

Dubai's high room rates are creating an opportunity for budget hotels in the emirate, and major hotel operators are eyeing a share of this potential market.

'When you look at the big names such as Accor, Intercontinental, and Marriott, they have all been pushing their mid and budget brands very hard in Dubai,' Podaras said.

'The beauty of those hotels is that you can push so many more of them into a city. How many Grand Hyatt's can you have? One or perhaps two, but you can cram in maybe ten Courtyards, Four Points, or Holiday Inn Express's. It makes a great deal of sense for the management company.'

InterContinental Hotels Group believes limited-service hotels are a burgeoning new segment in Dubai and the region in general. 'Many travellers are not looking for the full-service experience and simply want a clean fresh room that they can retire to at the end of a long day, and that is what limited-service hotels bring,' says John Bamsey, Chief Operating Officer, InterContinental Hotels Group, Middle East and Africa. 'We will see many tourists leaning to limited service hotels as a value for money option.'

Bamsey cites the emergence of low-cost carriers such as Al Jazeera and Air Arabia as one factor that is helping to attract budget-conscious travellers to Dubai.

'Our research has shown that the Middle East market has a gap for high-quality, internationally branded hotels which place an emphasis on quality at great value for money.