Middle East hotels strive to drive rates

Dubai and Abu Dhabi have succeeded in keeping strong occupancy rates in its hotels.

Hotels in the Middle East and Africa achieved an overall increase of 2.9 per cent to $44.55 in gross operating profit per available room, a key performance indicator for the hotel industry, in June.
HotStats data shows that the month was notable for the major disparity in performance across the region as a result of the holy month of Ramadan and the subsequent Eid Al Fitr celebrations.
"Despite the Middle East and Africa region performing ahead of the same period last year, with year-on-year increases in both top and bottom line metrics, the observing of Ramadan for almost the entire month of June meant that performance levels were some of the lowest recorded in the last 12 months," HotSats said.
"This is no better exemplified than in room occupancy, which plummeted to 47.9 per cent in June, which is well below the rolling average of 63.6 per cent recorded in the 12-months to June 2017. Very low occupancies were recorded in a range of markets across the region, including Abu Dhabi [51 per cent] and Kuwait [35.5 per cent]. However, profit per room in June was 44.7 per cent below the average for the 12 months to June 2017, at $80.68."
"As a result of the reduced volume, hoteliers struggled to drive room rates, as well as non-rooms revenue levels, and regional TrevPAR fell to just $163.60, against a rolling 12-month average of $205.88," it said.
"The 30 days of Ramadan ran from late May to late June this year and severely impacted trading in some major markets this month. In addition to impacting commercial demand levels, the Muslim holy month also hit leisure demand, as inbound visitors are reluctant to travel to destinations observing Ramadan as there is doubt about what will actually be open," said Pablo Alonso, CEO of HotStats.
For hotels in Abu Dhabi, RevPAR plummeted to a monthly five-year low of just $49.96 in June, 48.7 per cent below the average for the 12-months to June 2017, at $97.35.
Despite hotels in the UAE capital converting an 8.1 per cent decline in TrevPAR into a 16.6 per cent increase in Goppar to $49.96 as shrewd hoteliers slashed costs, a loss of -$5.09 was recorded at Abu Dhabi hotels this month.
June has punctuated a challenging six months for hotels in Abu Dhabi, with year-to-date declines recorded across key metrics, including Goppar (-13.8 per cent), to $51.71. As a result, profit conversion has fallen to just 28.1 per cent of total revenue in the six months to June 2017. In the previous month, Dubai and Abu Dhabi succeeded in keeping strong occupancy rates of 77.8 per cent and 73.5 per cent, respectively, according to a recent report issued by Ernst & Young. While the single room revenues in the hospitality sector in Dubai decreased by 11.6 per cent due to a decline in the average daily price per room to $211 in May 2017 from $225 in the same month a year ago, in Abu Dhabi, the single room revenues dropped 20.3 per cent, as a result of a decrease in the average daily price per room to $100 in May this year from $119 in May 2016.
The UAE's hotel construction pipeline is forecast to peak in 2017 and 2018 as the country gears up for the Expo 2020. Experts forecast 2017 and 2018 to be the busiest years, with 56 project openings in 2017 and 58 openings in 2018.
Dubai and Abu Dhabi will continue to lead in hotel construction across the UAE. In the hotels sector, a further 28,900 rooms are predicted to be delivered in Dubai over the next two years as capacity expands in the run-up to the event, according to Ventures GCC Hotel Market Overview.
While the value of the GCC hotel sector's projects expected to be completed in 2017 is worth $9.51 billion - an increase of $8.24 billion over 2016 - the UAE at $4.05 billion is the largest market in terms of construction projects lined up for completion, followed by Saudi Arabia.
According to HotStats, headline performance levels at hotels in Sharm El Sheikh increased by significant margins in contrast during Ramadan as the Red Sea resort benefited from a surge in tourism, including both Arab and domestic visitors, during the post-Ramadan Eid Al Fitr holidays, albeit from an extremely low base.
"Arguably, some hotels in the Middle East would be better off closing their doors for the month of June to save the losses. For others, being a destination for Eid Al Fitr celebrations, which mark the end of Ramadan, presents a fantastic opportunity to drive top and bottom line performance," said Alonso.
- issacjohn@khaleejtimes.com

Issac John

issacjohn@khaleejtimes.com