Over the past decade the UAE has gained a reputation as a luxury destination with the launch of numerous high-end Business hotels that have grabbed the attention of travellers across the world. Thanks to a steady rise in demand, room rates soared and remain among the most expensive in the world, but the onset of the global financial crisis has led to a sharp decline in revenues and occupancies across the country.
Business hotels in Dubai were hardest hit, as revenue per available room (revPAR) fell 31.4% to $163.31 in 2009, the largest drop in the Middle East and Africa in 2009, according to a new report by STR Global.
In Abu Dhabi, where more than 4,000 hotel rooms were added to the capital's existing 13,000 last year, occupancy fell 21.2% to 52.9% in December.
The declines have largely been attributed to a drop in the number of tourists from the UK - the largest feeder market to Dubai - and other European countries. With travellers looking to trim their spending, budget hotel brands see an opportunity to take advantage of the relative lack of affordable accommodation in the UAE.
Affordable hospitality
Although the UAE has focused primarily on attracting well-heeled travellers, it has always had its fair share of no-frills Business hotels. About 40% of Business hotels in Dubai and 30% of Business hotels in Abu Dhabi are 3 stars or less, the vast majority of which are unbranded, says Adrian Jonklaas, senior consultant at PKF The Consulting House.
The emergence of new budget brands is a sign of a maturing tourism market and should not be viewed in a negative light, he says. The advent of these Business hotels will not suddenly inundate the country with an undesirable low income segment, according to Jonklaas, who notes that budget travel is predominantly a $100 a day market. 'Guests at budget Business hotels in the UAE still have to buy air tickets, and business or leisure travel by air is very much a middle and upper class phenomenon,' he told AMEinfo.com.
'Another advantage of branded budget Business hotels is that they will keep prices of 4 and 5 star Business hotels under control and force the operators of these Business hotels to focus on delivering an exemplary service and guest experience to counter the value proposition that budget Business hotels offer guests, which is a desirable and sustainable outcome.'
