Kempinski Hotels Group in the UAE has begun to convert all of its contracts into euros in a bid to reduce the toll of US dollar’s decline of the group’s profits.
By the end of 2009, all domestic and international contracts will be exclusively in euro, said Doaa Amin, Regional Director of public relations for Kempinski Hotels and marketing manager of Kempinski at Mall of the Emirates.
The plan was put in place in 2007 and its implementation will span two years as there has been some resistance from clients, she said, adding the group is trying to provide clarifications and education.
“This plan has been in discussion for a quite some time due to the current situation of the euro currency verses the dollar to which the UAE dirham is pegged. This has a tremendous impact on our revenues since our main feeder markets as a company are in Europe; mainly major leisure and corporate clients who trade in euros,” said Amin.
The group loses potential revenue, she said, when currencies are converted by middlemen. Hoping to capture the losses, Kempinski in the UAE will convert contracts with Europeans into euro immediately before turning its attention to contracts in UAE dirham.
“Many of our partners have shown great support to this procedure and have immediately taken the new contract format on board. They said it made more sense to them since they are mainly active in euro-based countries and that they were not in the currency exchange business. However, other partners showed strong resistance and we are currently engaged in discussions to see how best to overcome the situation,” she added.
“We have given ourselves a chance until 2009 and then we will have all our contracts in euros.”
Meanwhile, other hotel groups in the UAE are considering similar moves. Samir Daqqaq, Vice-President of the Marriott International Sales Office, said while Marriott has not taken a decision to switch to the euro, it will study this option in the future. “If Marriott saw the dollar’s fall was affecting its profits, we would look for new alternatives,” he said.
Rahim Abu Omar, CEO of Al Habtoor Hotel Group, said the group had discussed recently the issue and took a decision to conduct further review. The Habtoor Group will take advantage of its participation at ITB Show in Berlin, he added, to discuss the issue with its European partners, as half of the hotels’ visitors come from European market.
Kempinski to deal in euros for global contracts