Eid holidays bring cheer – and profits – back to Dubai hotels

Dubai saw hotel revenues and profits grow as demand increases on the  back of Eid-al-Fitr holidays while Abu Dhabi witnessed a recovery in profits in August, according to the latest HotStats survey of full service hotels by TRI Hospitality Consulting.

Click here to access the list of Public Holidays in UAE (2012)
 
Neighbouring Abu Dhabi, however, saw profitability stagnate even as the UAE capital saw occupancy improve, notes TRI. “While Dubai thrived and profited from the spike in leisure demand brought forward by Eid-al-Fitr, Abu Dhabi found itself struggling to maintain the rates despite a favourable movement in the occupancy levels,” said Peter Goddard, Managing Director of TRI Hospitality Consulting in Dubai.
 
Occupancy in Dubai increased 8.7 percentage points to 64 per cent and Average Room Rate (ARR) increased by more than a fifth (20.4 per cent) to $204.93 (Dh752.70) on the back of a surge in demand from the regional and international travellers visiting Dubai on the back of Eid-al-Fitr holidays.
 
“Hotel profitability for August fell back into black this year compared to the same month last year when hotels registered losses due to lower occupancy levels, reduced room rates and elevated costs driven by Ramadan which occurred throughout the entire month,” the consultancy noted in its latest report on hotels in the region.
 
The growth in occupancy and rate resulted in 39.4 per cent growth in Revenue Per Available Room (RevPAR) to $131.12 (Dh481.60) for Dubai hotels. According to TRI, the increase in hotel demand was evident with Dubai International Airport witnessing a 20 per cent increase in passengers in August compared to the same period last year with the airport handling 4.85 million passengers.
 
“In August, Dubai hosted special events and promotions including the ‘Eid in Dubai’ festival, which attracted large number of regional travellers to the city, and rightfully winning the IFEA’s ‘World Festival and Event City 2012’ award for a second time. The growth in demand was seen primarily in the FIT, leisure and conference segments, boosting banqueting revenues up six fold driven by weddings and events,” TRI said in the statement accompanying the report.
 
The increase in occupancy also boosted the Total Revenue per Available Room (TRevPAR) in Dubai hotels by almost a third (29.2 per cent) to $239.10 (Dh878.21), driving Gross Operating Profit Per Available Room (GOPPAR) up manifold to $39.54 (Dh145.23).
 
On the contrary, the Abu Dhabi hotel market, which is largely driven by corporate demand, experienced mixed performance. Hotels in the capital witnessed a 5.8 percentage point increase in occupancy to 56.9per cent and ARR dropped 9.4 per cent to $95.96, although RevPAR and TRevPAR saw marginal changes only and stood at $54.57 and $134.12, respectively. Nevertheless, GOPPAR for the city saw an increase of 26.1 per cent from last year to $18.18.
 
“Eid holidays typically attract heavy visitor traffic to Dubai as visitors from the neighbouring GCC countries gravitate towards the city as it offers a wide variety of options for them to spend their long holiday,” said Goddard. “However, Abu Dhabi attracts limited leisure demand currently due to the lack of a wide range of leisure attractions and facilities while the corporate market, which is its main demand market, slows down during the summer and Ramadan,” he added.
 
“While hotels in the capital should witness a recovery in occupancy levels in the next few months as we approach the high season, average rate will continue under pressure as new hotels continue to enter the market,” he warned.
 
Click here to access the list of Public Holidays in UAE (2012)

Eid holidays also brought cheer to hotels in Kuwait as revenues and profits improved in August, TRI said. The limited impact of Ramadan and the surge in demand during the Eid holidays helped hotels in Kuwait post a 17.8 per cernt growth in revenues and a 72.9 per cent increase in profits in August this year, according to the HotStats survey.
 
Occupancy increased marginally to 33.9 per cent, up 1.3 percentage points while Average Room Rate (ARR) dropped 1.3 per cent to $238.91, compared to the same period last year, leaving the rooms revenue in terms of RevPAR for the month at $80.99 with only a marginal increase of 2.7 per cent.
 
Despite the extremely low occupancy levels, Kuwait hotels are somewhat shielded from a heavy drop in rates, thanks to the rate agreement sponsored by the Kuwait Hotel Owners Association which the majority of the four and five star hotels are part of.
 
However, a strong growth in food and beverage and leisure revenues caused the TRevPAR to increase by 17.8 per cent to $190.86. The growth in revenues reflected the impact of the retracting Ramadan, limiting the impact of the slump in demand this year, as well as the upswing in food and beverage and leisure sales during the Eid holidays which attracts large number of domestic and Saudi travellers to spend in Kuwait. On the bottom line, this growth in revenues converted to a 72.9 per cent growth in GOPPAR at $56.97 compared to same period last year.
 
The year-to-date figures from the HotStats survey show that performance levels in Kuwait have softened across all major KPIs over the past eight months, compared to the same period last year. On the top-line, the market witnessed a 6.9 per cent drop in RevPAR and 1.6 per cent drop in TRevPAR during the period while at the bottom line the GOPPAR saw a decline of 1.8 per cent.
 
The overall decline in performance can be attributed to the wider impact of the on-going political stalemate in Kuwait on the demand from major market segments. TRI research indicates that business demand, including both local and inbound corporate travel, and meetings/events demand, has suffered during the year as projects worth over $61 billion remain on hold.
 
“Hotel demand in Kuwait is driven by government and corporate demand, and meetings and events business, therefore the on-going political uncertainty appears to have had a direct impact on the market,” said
Goddard.
 
“Leisure tourism in Kuwait is relatively limited, however we note that leisure demand has seen notable growth this year which we believe is driven by a higher number of nationals and visitors from neighbouring Saudi Arabia spending holidays in Kuwait as the Levant region remains unstable. This growth in leisure demand has provided some relief to the hotels which are facing an otherwise damp season this year,” he noted.
 
Elsewhere in the region, Jeddah hotels closed the month on a high, with 34.5 per cent growth in RevPAR and 40.2 per cent growth in profits, while hotels in Cairo saw strong recovery in demand in August, according to the HotStats survey.
 
Occupancy in Jeddah was up 8.6 percentage point at 70.5 per cent and ARR increased 19.9 per cent to $257.53 in August this year compared to the same period last year. RevPAR for the month posted a growth of 34.5 per cent, and GOPPAR increased by 40.2 per cent to $160.38, the highest amongst the seven cities surveyed in the MENA region.
 
Performance levels in Riyadh however remained subdued as the corporate demand, which is the mainstay of hotels in the city, remained low due to Ramadan and the long Eid holidays. ARR remained unchanged at $225.18, however a 4.9 percentage point drop in occupancy resulted in the RevPAR fall by 14.4 per cent to $65.39, dragging GOPPAR down by 15.6 percentage points to $40.61.
 
“Jeddah hotels continue to benefit from the strong demand from domestic tourists, especially during the end of Ramadan and the long holidays for Eid-al-Fitr. This year, Jeddah and even Riyadh, to an extent, appear to have benefited from the on-going unrest in the Levant as more Saudi tourists are opting for domestic destinations, driving demand for hotels and entertainment facilities. Obviously, hotels apply effective yielding strategies during these peak periods which is reflected in the growth in RevPAR and GOPPAR in Jeddah,” said Goddard.
 
Hotels in Cairo and Sharm El Sheikh appeared to be marching forward on the path to recovery as both markets registered a strong growth in performance. Occupancy levels increased 18.6 percentage points from 22.4 per cent in August last year to 41 per cent last month and remained relatively stable compared to last few months. Although ARR declined marginally to $113.02, the surge in occupancy resulted in a 78.1 per cent growth in RevPAR and 61.6 per cent increase in TRevPAR.

At the bottom line, this resulted in a 291.3 per cent growth in GOPPAR to $42.22.
 
Sharm el Sheikh hotels recorded the largest growth in ARR in the region with a 28.3 per cent increase from $41.23 to $52.91. This improvement in ARR coupled with a 3.0 percentage point rise in occupancy to 70.6 per cent, drove a 34 per cent increase in RevPAR to $37.37. Despite having augmented significantly since last year, GOPPAR figures remains weak in Sharm el Sheikh presumably due to rates offered to travel agents which account for 32.8 per cent of demand in the area.
 
“Cairo’s hotel industry is showing signs of a slow recovery from the turbulence it has experienced during the past year. As safety concerns subside and business activity and sentiment resumes, leisure and corporate travellers are returning to Cairo boosting occupancy and revenues significantly. Sharm el Sheikh’s recovery as a leisure destination is also evident as travellers are now more inclined to visit the area which is sign that the holiday destination is well on its way to regaining its popularity among regional and international tourists,” said Goddard.

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