Hotels in Dubai are beginning to feel the pinch of the global economic crisis, with some offering big discounts to combat a decline in occupancy.
A decline in hotel occupancy in the emirate was unavoidable due to the enormity of the economic slump, says Anwar Abu Monassar, General Manager of Net Group, a Dubai-based tour operator.
'There has been a drop. At the moment hotels are suffering, but the crisis is coming from outside. It is not just a problem for Dubai or the UAE. It is a worldwide problem,' he noted.
Hotels in Dubai were ignoring some of the early signs of the slowdown, he contends, as there were some economies in Europe that were hurting even before the global financial meltdown began.
'In August, Dubai's rates were the highest in the world. I am not happy when I see rates that are so high. You are limiting yourself. In just ten years hotel rates went from $50 a night to $1,500 per night. You can call it what you want - snobbery, crazy, very good, it depends on your point of view at the end of the day,' he said.
Now people are travelling even less, especially from the UK, which is the main market for the UAE. 'Today we have so much supply, but four months ago we were all crying because there was no supply. I think the market will find a better balance when all of the new hotel projects being built are open. A city needs to have a certain capacity,' he said.
By the end of June 2008, a total of 340 hotels were in operation in Dubai compared with 317 in the same month in 2007, while the number of apartment hotels grew to 149 from 123.
Team effort needed
When a city's tourism sector is suffering, hotels cannot be expected to address the problem on their own, Monassar says. The city needs to develop a strategy, and hotels need support from the tourism department and local airlines as they are all inter-related.
He pointed to a new marketing campaign launched last week by Dubai's Department of Tourism and Commerce Marketing (DTCM) that aims to boost visitor numbers during the Dubai Shopping Festival, which began on January 10 and runs until mid-February.
The campaign will encourage hotels to offer discounts of up to 60% on room rates, in addition to a 25% discount on the prices of food and beverages. Britain, Germany, India, China, Japan, Australia and the GCC countries are the major markets being targeted for attracting tourists. Khalid Ahmed bin Sulayem, said the campaign was part of an effort to sustain tourist attractions throughout the year.
Some hotels have already begun to offer huge discounts to combat the slowdown. Some have cut their prices by up to 50% on weekend breaks for bookings made before the end of August this year. Similar offers will be spread to the hotels across 45 countries including the Middle East.
For his part, Monassar believes it is better for hotels to try to attract visitors with 'tactical offers' such as free nights and dinner specials, rather than lowering rates. 'Once you lower your rates the destination itself is losing value and it's difficult to get that back later,' he contends.
Experience is key
There are two important factors that hotel operators need to survive this challenging period. 'I believe that you need to have a lot of experience. Many companies started operations in the past year, but they have never gone through bad times before. The other thing you need is to be everywhere. Spread yourself around. Don't limit yourself to one region. It's like being a farmer; you need to have more than one field,' he said.
Despite the enormity of the economic crisis and the number of hotels that are coming online in Dubai, Monassar remains bullish on the prospects for the hotel sector in the emirate. 'It's not that the city is going down. It is still participating in major exhibitions and events that are recognized throughout the world,' he noted.
'You have a crisis in the sector that is affecting every city in the world. But the crisis is a current situation, it cannot last forever. There will be a point where it will get better again, it is a cycle.
'Hotels will not enjoy the same situation they had before, where they had high rates and they could sell whatever they wanted. In the future there will be more balance. Definitely not undersupply and not oversupply.'
