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How did Dubai hotels perform in the first quarter?
It's an interesting situation. January was a bit of a shocker. We saw about a 33% reduction in REVpar and everyone began to get concerned. Then February got worse. It was more like a 40% reduction. So everyone started tightening their belts and wondering about what would happen in the future.
But March seems to have saved the day. Hotels on Sheikh Zayed Road - which are three to four-star properties - had nearly 80% occupancy for the month, and the beach hotels averaged about 85%. So occupancies for the month were only about 5%-10% lower compared to the same period last year, which is the good news.
The bad news is that the high occupancies typically were bought at the expense of room rates. Hotels obviously have been proactive and have made some attractive offers to lure guests. In particular I would suggest that the beach hotels have been offering very attractive packages to lure groups, judging by the high occupancy rates these hotels have achieved.
How much have room rates fallen in the emirate?
Clearly rates have been impacted. In the current climate tourists are simply not prepared to pay what they did before. However certain sectors are less elastic than others. For example, the leisure sector can go anywhere they like, so if hotels want to attract that segment they are going to have to drop their rates, which they have done.
The corporate sector is more resilient, they come here for specific reasons. However, if the rates at five star hotels get too expensive then business travellers will stay at four stars, and so forth and it will trickle down through the market. But so far we have not seen a rate war here.
The fact is if you call the hotels and ask for a rate they will quote you pretty close to the rack rate, so they are being pretty selective about whom they give reductions to.
What types of hotels are being hit hardest by the financial crisis?
Most hotels, except for those that are doing well, are reluctant to give us hard and fast figures. However, it's pretty obvious that the ones that are performing well are hotels in the mid-market category and those which have a wider appeal, meaning those that are in a good location, offer value for money, and appeal to the corporate segment.
Probably the best example of this is the Four Points hotel on Sheikh Zayed Road, which has excellent location and positioning - they are doing extremely well.
Hotels that are probably not faring so well are those addressing a narrow segment of the market, such as ones at the very high end with a brand that might not be so well known. But I don't think it's as simple as expensive versus non-expensive, because there are some five-star hotels that are doing well.
Are hotel projects continuing to move forward in Dubai?
Work on projects in Dubai has slowed down immensely. It's difficult to say which projects have been cancelled and which are being delayed.
Clearly the financial crisis means that everyone has to take a step back and rethink their finances, and a lot of companies are taking this opportunity to re-tender their contracts. One client in Abu Dhabi told me that he was able to negotiate as much as a 40% reduction on his overall project costs.
Jeff Florian, Senior Reporter
