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01 March 2024

Luxury hotel occupancy declines 15.2%

Samir Daqqaq

By Nina Varghese
Dubai's luxury and high-end hotels registered occupancy levels of 68.3 per cent in January 2009, a decline of 15.2 per cent, compared to 80.6 per cent in the same period the previous year, according to a research by STR Global.

In the upscale and mid-market segment, occupancies were 73.3 per cent, a decline of 10.8 per cent.

While research data shows that occupancy levels have declined right through 2008, hotel industry sources said that one of the reasons for the decline in the first half of 2008 was the increase in supply of rooms.

Commenting on the decline in occupancy levels, Samir Daqqaq, Marriott Hotels International's Vice-President for Global Sales, Middle East and Africa, said: "The decline in occupancies is still conservative."

The largest decline, however, was recorded in December 2008, which saw occupancies fall by 15.6 per cent. Daniel Hajjar, Chief Executive of Layia Hospitality, said: "December was indeed a challenging month. The first 13 days of the month saw closure of most of the government and semi-government entities due to public holidays. After December 18, the business slowed down due to the year-end festivities. So we really had just one working week in the entire month. If you add to this the current financial crisis, I believe the occupancy was somehow acceptable."

Robert O'Hanlon, Tourism, Hospitality and Leisure Partner at Deloitte Middle East, said: "The global economic downturn has had an impact on inbound hotel activity in the Middle East, but it is still too early to determine the full extent of the impact. The timing of Eid, when many expatriates took the opportunity to return to their home countries, combined with the backdrop of a global downturn makes it difficult to extrapolate the trend from these figures alone."

According to business advisory firm, Deloitte, the region achieved the highest occupancy and average room rates in the world as per the 2008 full-year data. The Middle East revenue per available room (revPAR) rose 18.3 per cent to $148 (Dh543), a notable $44 ahead of the next best performing region, Europe.

In the UAE, Dubai and Abu Dhabi continue to share the league table for the highest occupancy, average room rates and revPAR in the region. Even though revPAR in Dubai only grew 0.8 per cent in 2008, the emirate still holds the title for the highest average room rates and revPAR at $300 and $237 respectively. Interestingly, revPAR growth in Abu Dhabi is soaring and saw a 46 per cent rise in 2008 to $230. Occupancy increased from 8.9 per cent to 81.5 per cent, one of the highest in the Middle East.

Beirut, meanwhile, achieved the strongest growth in 2008 reporting a 101.1 per cent leap in revPAR to $95. The city saw strong growth last year as it bounced back after suffering from political tensions in 2006 and 2007.

Much of this growth, according to Deloitte, was driven by average room rates, up 17 per cent to $215. Meanwhile, occupancy increased by 1.2 per cent to 68.8 per cent while all other regions apart from South America (up 1.7 per cent) experienced drops in occupancy.

Alex Kyriakidis, Global Managing Partner of Tourism, Hospitality & Leisure at Deloitte said: "Hotels across the Middle East performed well in 2008. However, maintaining this growth in 2009 is going to be difficult."

He said the first challenge facing the Middle East hoteliers is the economic crisis in Europe. "With European economies in recession and house values declining, consumer confidence – the key measure of travel demand, is in negative territory with little prospect of it reversing before the end of 2009," he said, adding that almost 45 per cent of hotel room bookings in the UAE come from European visitors and 15 per cent from the UK, the fall-out having a significant impact on the UAE hotel bookings.

The second challenge, according to Kyriakidis, is that for the UK travellers. "The UAE has become 30 per cent more expensive over the past three months as a result of the strengthening US dollar, so the UK pound has gone from Dh7.5 to Dh5. This makes Dubai very expensive from the UK travellers' perspective," he said. "The combination of the above, coupled with the drop in construction and other capital project activity has meant that both the leisure and business travel sectors are down. I cannot see an improvement until consumer confidence returns in the feeder countries."