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28 March 2024

Dubai hotel rates down 26% in first half

The number of additional rooms in the pipeline for Dubai hotels sector amount to 35,500 rooms by the end of 2009. (EB FILE)

Published
By Shweta Jain

Dubai emerged as an attractive destination in the first half of 2009 for travellers paying in US dollars as hotels saw average room rates dropping 26 per cent from their level a year earlier, according to Hotels.com hotels price index (HPI).

Average room rates in Abu Dhabi hotels, on the other hand, dropped by nine per cent year on year, the index revealed. Globally, however, hotel rates fell by an average of 17 per cent in the first six months of the year, as against the same period in 2008, touching the lowest levels for five years, driven by price drops across every continent.

Hotel prices in June 2009 were more than one sixth lower than they were the year before and room rates were just one per cent above their level in January 2004, when the Hotel Price Index was started.

As for British visitors, paying for hotel rooms in pound sterling, room rates in Dubai dropped a more modest four per cent year on year, while rates for the United Kingdom's travellers actually went up by 15 per cent in Abu Dhabi, as per the index.

The report revealed that Abu Dhabi topped the charts in terms of average room rates for hotels at £173 (Dh1,047) for the first half of the year, followed by Moscow at £167, Geneva at £146, and New York at £139.

According to the index, the average per night room rate in Dubai hotels rested at £122 for the period January-June 2009, compared to £126 for the same period a year earlier.

Whereas, Abu Dhabi hotels saw room rates averaging at £173 in the first half of 2009, up from £150 in the same period a year earlier.

As a result of the changes in prices, fewer British and Russian travellers visited Dubai in the first half of 2009 and more visitors from the US and Italy took their place, the index revealed.

But overall, the drop in room rates from their previous peak levels seems to be playing as a major factor in making Dubai a more attractive destination in challenging times when the tourism trade is on a decline globally.

"Dubai has seen one of the greatest drop in rates, making it an even more attractive tourist destination, while hotel prices in Abu Dhabi have also fallen significantly. As a result of the economic downturn we have seen a change in the profile of tourists visiting the UAE: fewer visitors are coming from the UK and Russia while we are seeing more tourists from Italy and the United States," Walter Lo Faro, Director of Market Management, Middle East & Indian Ocean, Expedia, told Emirates Business.

As per the index, hotels in Dubai are extending their summer and weekend packages and promotions through Ramadan in order to boost occupancy by attracting visitors from the neighbouring emirates and other GCC countries "for a chance to stay in some of the world's top properties for a great price".

David Roche, President, Hotels.com worldwide, said: "The dampening effect of falling consumer demand has been compounded by sharply increased hotel capacity. In the first half of 2009 an ever larger number of hotel rooms chased a dwindling stream of customers, and this 'double whammy' lowered prices by 17 per cent globally."

He added: "As demand fell, hoteliers closed floors and cut back both services and prices, creating a market with a distinctly promotional character that is likely to endure for some time."

Average room rates in Dubai hotels are set to go higher in the fourth quarter of the year, according to industry experts, after the industry witnessed up to 60 per cent drop in average room rates for almost a year.

"Between October 2009 and January 2010, the average room rates for Dubai hotels will get much better. We will see the hotel tariffs going up by at least 20-30 per cent from their current levels," Amine Hamdani, Vice-President, Fund Advisory and Indirect Investment, CBRE Hotels, recently told this newspaper.

Accustomed to one of the strongest average room rates in the world, Dubai hotels saw room rates going down by between 40 and 60 per cent earlier this year, succumbing to the slump in the global tourism trade.

However, the increase in the fourth quarter of this year would be backed by market conditions looking up besides the festival season in the later half of the year, according to Hamdani.

As per the directives of Department of Tourism and Commerce Marketing (DTCM), Dubai hotels started offering discounts on room rates ranging from 40 per cent to 60 per cent from mid-January this year until mid-February to lure an increasing number of visitors to the annual Dubai Shopping Festival.

The offer was then extended even beyond the shopping festival as the global travel industry continued its steep decline due to crisis.

In the first half of this year, the average room rate for Dubai hotels rested at $248, (Dh910) according to CBRE Hotels. And, the average rate projected for the third and the fourth quarter is $225.

"The average room rates for Dubai hotels will be higher in the last quarter of the year, while the rates in the third quarter, that we are currently in, would be similar to those we experienced in the second quarter," Hamdani pointed out.

Dubai hotels also continue to lead the hospitality sector worldwide in profitability with net profits, or margins, of 35 per cent in 2009, according to CBRE Hotels.

Also, according to DTCM, Dubai hotels industry in the first quarter of 2009 showed a five per cent increase in guest numbers, 17 per cent rise in hotel room inventory and 30 per cent increase in hotel apartments.

In 2008, Dubai hotels played host to 7.5 million guests, an increase of 8.3 per cent compared with 2007, while guest nights swell by 9.2 per cent to touch 22.42 million guests.

While the UK remained the top source market for Dubai tourism industry in the first quarter 2009, it was followed by Iran, India, United States, Saudi Arabia, Germany, Russia, Pakistan, France and Kuwait, according to the DTCM.

To add to this, despite the fact that the hoteliers in the Middle East continue to face challenging times, the region was ranked the top performer in RevPAR (revenue per available room) for July in a recent Deloitte and STR Global study, beating Europe, the Americas and the Asia-Pacific.

In Dubai alone, the RevPAR went up by 0.44 per cent from June to July 2009 compared with a fall of 12.23 per cent during the same period last year.

Meanwhile, the number of additional rooms in the pipeline for Dubai hotels sector would amount to 35,500 rooms for four and five star hotels by the end of 2009 and 39,500 rooms by 2010, followed by and over 42,500 rooms after 2011, according to CBRE Hotels data.



Fall in global hotel rates

Globally, prices for hotel rooms in North America were down by 17 per cent in the first six months of the year, with rates in Europe faring little better, dropping 16 per cent during the same period, as per the Hotels.com index, which tracks the real prices paid per hotel room rather than advertised the rates. The data is based on prices actually paid by customers at 78,000 hotels across 13,000 locations around the world, said Hotels.com. Asian hotel rates, on the other hand, which had been holding up better than those in the US or Europe, tumbled in the first half of the year dropping an average of 17 per cent compared to the same period one year earlier due to the region's drop in business travel.

Hotel rates in the Caribbean, however, only saw a single-digit fall with rates dropping just two per cent in the first half of 2009.

 

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