UAE hotels see rise in revPAR

As the end of the first quarter of 2010 approaches, the UAE hotel industry seems to have regained its footing, with an increase in hotel revenue per available room or revPAR and room occupancy levels.

Analysts also predict that investors in the hospitality sector are gradually making their way back to the country.

Other emerging trends include budget hotels benefiting from last year's economic downturn, even as luxury hotels witness higher occupancy. Analysts also predict the luxury hotel model is fast gaining lost ground in the region.

"In the times of economic turmoil, mid-market and budget hotels have proven themselves resilient. Budgets of the business travellers are lower and so they cannot afford to stay in a five-star hotel. Meanwhile residents of Dubai would rather put visiting family in a conveniently located affordable three-star hotel than foot the bill for an expensive hotel," said Michael A Weyland, General Manager, Hotel Division, Landmark Group. The group recently launched its Citymax Hotels budget brand in the UAE. Several mid-market hotels including Premier Inn and Ibis have recorded an increase in occupancy levels in recent months.

A top company executive told Emirates Business that revenues from the Middle East could account for up to 15 per cent of the total earnings of budget hotel chain Premier Inn by 2015.

"The demand for budget hotels and luxury hotels will go parallel and will increase gradually from now on. There are customers who want clean and consistent hotels at budget price while there are others who want their peace of mind and certain luxury, both customers are present in the market; hence, neither of the hotels will eat in to each others' share," said Samir Daqqaq, Senior Vice-President, Development (Mena), at the Dh46 billion Oetkar Hotel Collection (OHC).

An industry insider, who asked to remain anonymous, said: "Many top luxury hotels in Dubai are cutting costs to improve their revPAR. There is also a price pressure on the room rates. Most of the hotels had to cut down their room rates and hence took a hit on their profitability."

Last year, industry experts expected Middle East hotels to show modest signs of recovery by the end of 2009 with occupancy rates improving gradually.

"The UAE continues to remain ahead of most of its counterparts in Mena as far as revPAR is concerned. The UAE hotels' revPAR was second only to Lebanon," according to a recent research report by MKG Hospitality, a French research firm. "The bottom line for hotels has shrunk on account of reduced room rates, resulting in lower revPAR. The UAE recorded a 20.8 per cent revPAR decrease. This was due to a 15.2 per cent decrease in average daily rate (ADR).

In 2008, average room rates increased by 16.5 per cent over 2007. Dubai was worst affected with a 27.5 per cent decrease in revPAR. Abu Dhabi remained resilient with a 4.9 per cent drop," said MKG.

Weyland said:"Dubai has become affordable for investors. The mid-market hotels combined with the low cost carriers have opened completely new market."

When asked about revival in the sector, Weyland said, "Overall, I feel that by 2012, the hotel market will recover in line with the global economy."

The Middle East hospitality sector is, however, witnessing more interest from overseas investors.

Talking to this newspaper, a senior M&A head with a Dubai-based hospitality consultancy, said many investors are exploring opportunities but are playing a wait and watch game.

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