Dubai hotel room rates increased in July despite drop in occupancy rate mainly due to summer and the holy month of Ramadan, according to the latest HotStats survey of full service hotels in six MENA cities by TRI Hospitality Consulting.
In the UAE, hotel performance levels for Dubai and Abu Dhabi during the month of July highlighted the double impact of summer and Ramadan. Occupancy levels in Dubai fell 11 percentage points to 70 per cent in July while average room rate (ARR) increased by 6.4 per cent to $188.51.
Additionally, the onset of Ramadan caused a notable decrease in food and beverage revenues as well. The 8.2 per cent drop in TRevPAR and the increase in costs including the 5.5 percentage points rise in Payroll caused a dent in the bottom line, dragging GOPPAR down by 30.6 per cent to $45.18.
Abu Dhabi continued to demonstrate a decline in performance with a reduction in all performance indicators. Occupancy dropped 4.5 percentage points to 57.1 per cent while ARR dropped 8.4 per cent to $104.95 causing a 15.1 per cent drop in RevPAR during the month. As in the other GCC markets, Abu Dhabi too saw a considerable decline in food and beverage revenues last month due to the restrictions on sale and consumption of food and certain drinks during Ramadan. The decline in all performance metrics coupled with an increase in payroll costs resulted in a 40.4 per cent drop in GOPPAR compared to the same period last year to $24.33.
‘Our HotStats data for Dubai and Abu Dhabi highlights the effect of the culmination of the low seasons as we saw Ramadan, which is a traditional low demand period, moving into the peak summer period last month. Although performance levels are expected to improve in both cities after Ramadan, Abu Dhabi is likely to face continued pressure from increased competition especially when additional hotels including the Ritz Carlton enter the market at the end of 2012 and early 2013” said Peter Goddard, Managing Director of TRI Hospitality Consulting in Dubai.
In Jeddah, hotels posted 30.9 per cent growth in profits in July this year while the effect of summer and Ramadan impacted hotel performance levels in all other markets surveyed.
Average occupancy at four and five star chain hotels in the city reached 83.9 per cent, growing by 3.1 percentage points, while Average Room Rates (ARR) increased to $229.39, up by 11.1 per cent compared to the same period last year. As a result, Revenue Per Available Room (RevPAR) for the month increased by 15.4 per cent to $192.47 while Total Revenue Per Available Room (TRevPAR) increased by 19.2 per cent to $296.79, primarily driven by a surge in revenues from food and beverage and events which grew by nearly a third over the same period last year.
The growth in revenues was further supported by a notable drop in operating expenses, as payroll and operating costs for food and beverage and meeting facilities were considerably lower than last year. At the bottom line, these changes resulted in a significant gain on profitability, boosting Gross Operating Profit Per Available Room (GOPPAR) by 30.9 per cent to $143.82.
In Riyadh, however, top line indicators for four and five star full service hotels saw marginal decline last month compared to the previous year. A 3.2 percentage point drop in occupancy to 46.5 per cent dragged the RevPAR down by 5.6 per cent to $104.34, despite a marginal increase in the ARR during the month. The decline in top line revenues coupled with the increase in payroll by 4.3 per cent resulted in GOPPAR falling 11.5 per cent to $58.59.
“The Jeddah market has demonstrated consistently strong performance, particularly in the last few years since Ramadan has been moving into the summer months, effectively negating the seasonality of demand in this market. Jeddah has been a hive of activity last month as the city saw peak demand from domestic leisure travellers, in addition to several meetings and events which took place during the first half of the month. A spike in religious travellers and Ramadan-related events during the latter part of the month also boosted occupancy levels in hotels. Riyadh, on the other hand, suffers from a more pronounced seasonality as evident from the notable dip in key performance indicators this summer compared to the strong performance levels seen in the peak seasons,” said Goddard.
Hotels in Cairo and Sharm El Sheikh saw profits drop in July due to lower revenues and higher costs, according to the latest HotStats survey of full service hotels in six MENA cities by TRI Hospitality Consulting.
In the capital Cairo, hotels witnessed a marginal increase in demand, recording a 1.9 percentage point increase in occupancy to 43.2 per cent while the ARR declined by 9.4 per cent to $113.35. However, given the thin profit margins achieved by Cairo hotels since the beginning of the Arab Spring, the drop in revenues and the growing costs such as the payroll and overheads have resulted in a 46.4 per cent decline in profits as the GOPPAR dropped from $55.79 to $29.89 during the month.
“Despite its position as the administrative capital and major commercial centre of Egypt, Cairo has historically had a balanced mix of business and leisure demand, both of which were affected by the revolution and the subsequent events. Now that the dust is settled, the government is at work and stability has returned, we believe hotel performance in Cairo will steadily recover in the coming months.” commented Goddard.
Sharm El Sheikh hotels recorded a 9.7 per cent increase in average rate in July, posting an ARR of $44.97. However occupancy was lower by 5.3 percentage points compared to the same period last year. The increase in ARR was sufficient enough to absorb the decrease in occupancy as RevPAR increasing marginally by 1.6 per cent to $30.10. Nevertheless, the city-wide GOPPAR declined by 12.7 per cent to $18.52, primarily driven by a 7.7 per cent increase in the overheads.
“Sharm El Sheikh hotels experienced a fall in demand in July which can be attributed to the drop in arrival of regional tourists due to Ramadan. In addition, the ban on sale and consumption of alcohol during Ramadan and religious occasions may have impacted the demand from Western tourists as well.
“However, it is worth noting that Sharm El Sheikh has led the recovery in hotel demand in Egypt after the revolution and now, in our view, hotels here may be beginning to show the confidence to gradually increase rates as indicated by the strong growth in the Best Available Rates (BAR) and Corporate rates during the month of July” said Goddard.