Fairmont forges ahead amidst 'perfect storm'

The tourism industry is in the midst of a perfect storm, with the credit crunch, swine flu, job cuts, and a number of other factors impacting travel right now, said Philip Barnes, Regional Vice President, Fairmont Hotels and Resorts.

'I think the general concern that people have all over the planet is will I have a job next month.

'While it is true that people are still travelling, it's partly due to the fact that they booked their vacation a while ago, so they are committed to go,' he said.

Barnes believes that occupancy levels have dropped fairly evenly throughout Dubai over the past year, with the few hotels that have continued to fill their rooms having done so by offering big discounts on rates.

'You'll see hotel occupancies run in the 50s this year, as opposed to the 70s last year. The beach resorts have had strong occupancy through the winter, which is their peak season, but at the cost of rate.'

'But this is always what happens at a time like this. You sort of go through this ebb and flow, and the challenge is to hang to as much rate as you can. Because once you go too low down on rate then you have to cut costs to the point where you are at the bottom, and that doesn't help anyone.'

Discounts and add-ons

To help weather the storm, Fairmont is offering a mix of room rate discounts and special add-ons to attract guests. 'I think we are doing what everyone is doing in the market, which is if you've got an empty room, you've got to look and see how you can sell it, and that is the key to success in the hotel business, because if it is not sold tonight, it is gone,' he told AME Info.

So far, all of Fairmont's projects in the Middle East have continued to move forward, although a few have slowed, Barnes said. Five hotels are in the pipeline in the UAE, three in Saudi Arabia, and one each in Egypt and Oman.

In addition, Fairmont is managing an expanding roster of branded and unbranded residences on the Palm Jumeirah in Dubai. The Palm will also be the future home of the Fairmont Palm Hotel, scheduled to open in late 2010, and the Kingdom of Sheba, which Barnes says is progressing 'very, very slowly'.

Less competition

Asked if he was concerned about how Fairmont's upcoming hotels would be able to compete with all of the other projects on the Palm, including the Atlantis, Barnes said, 'the number of hotels on the Palm was always a concern, but that problem has kind of gone away as a lot of other projects there have been cancelled.'

'Throughout Dubai, the amount of supply that was coming onstream was cause for sleepless nights because it was all going to come on within a four-year window, which would create a horror in the marketplace. I think what we will see is the amount of supply that was due to come online will reduce dramatically, which hopefully means demand will catch up that much faster.'

However, he believes that although Dubai will see a recovery, it is unlikely that hotels in the emirate will see the same level of growth that they enjoyed prior to the economic crisis.

'From my perspective, the hotel industry in Dubai is not going to come bouncing back in the way it was in the near future, if ever. It's all part of the maturing of the destination. The exponential growth could not continue forever. But I see this as being a good thing for Dubai, helping us to stabilize and get a clear picture of what is going on,' he explained.

Service is key

One of the biggest challenges facing hotels in Dubai is that their food and beverage business - which was largely driven by the local community - is now taking a hit as the expat population is shrinking and spending less money.

The silver lining of this for consumers, Barnes says, is that hotels will need to work harder to compete for business, which means they will have to greatly improve their service.

'We've all seen examples where service is Dubai was woeful, but demand was so high it didn't matter. But when demand drops dramatically, people really have to rethink their game. So now we are going to see who really is focused on looking after the customer and the guest in the hotel.'

Barnes makes no predictions about when the recession will end, noting only that when a downturn bottoms out the hotel sector typically lags six months behind other industries before seeing a recovery.

For the time being, the Fairmont's hotel in Dubai is preparing for the recovery by renovating every room on the property. 'The capital injection is going in now, so when this thing does end, we are well positioned,' he said.

'I think as long as everyone is focused on selling the destination, and the government is continuing to do the things it is doing, and the hotel community is out there banging the drum in the same way, the destination will come back. We are not the only destination in the world that is struggling. Things can always be worse.'