Dubai has posted an all-time high hotel revenue and double-digit increase in room inventory for 2008, but this doesn’t mean the emirate is unaffected by the credit crunch. Julian Tan reports
Dubai’s achievements – building the world’s tallest skyscraper (Burj Dubai at 818m), biggest hotel, shopping and entertainment district (Bawadi which will include a cluster of 51 hotels or over 60,000 rooms on a 10km-long boulevard, scheduled to complete by 2014) and largest man-made island projects (with the likes of the Palm Islands, The World and The Universe) – read like a leaf straight out of the Guinness Book of World Records.
A world-class city also boasts an impressive array of accommodation, and the emirate certainly has all the “who’s who” of hospitality on its doorstep, including Jumeirah, the InterContinental Hotels Group (IHG) and Starwood Hotels and Resorts, just to name a few. Figures from the Dubai Department of Tourism and Commerce Marketing (DTCM) show that as of January this year, there are 348 operating hotels and hotel apartments, comprising 51 five-star hotels, 57 four-star, 43 three-star, 47 two-star, 133 one-star and 17 guesthouses. The total room tally: 40,502.
Commenting on the challenges facing Dubai’s tourism sector in the wake of the recession, Eyad Ali Abdul Rahman, executive director for media relations and acting director for business development, DTCM, says: “The global economic crisis is impacting every sphere of life and the tourism industry (in general) is facing the heat of the toughest operating business environment.” But he is quick to add: “The emirate of Dubai has less bearing compared with other destinations. The interest of the travel trade and tourists in Dubai remains strong.”
That’s not to mean that local hoteliers haven’t felt the pinch. “We are aware that we’re not operating in isolation,” says Apo Demirtas, chief sales and marketing officer, Jumeirah Group. According to him, Dubai in general is experiencing softer occupancies of 72 to 73 percent, down from 90 percent. “But a lot of marketplaces around the world would die to have the kind of occupancies we have in Dubai today,” he adds. Jumeirah, however, appears to be bucking the trend, seeing occupancies in its beach properties (eg Burj Al Arab and Jumeirah Beach Hotel) hover around 92 percent in February.
According to latest figures released by the DTCM, Dubai posted an all-time high hotel revenue of AED15 billion (US$4 billion) and a double-digit increase in room inventory in 2008. Khalid A bin Sulayem, director general of DTCM, says: “The results are highly encouraging and reflect the vibrancy and dynamism of the emirate’s expanding tourism industry. The performance reflects the efforts and ability of Dubai in confidently navigating through one of the most difficult journeys that the global tourism industry is faced with.”
However, along with any success comes the challenge of sustainability. And ambitious hotel and commercial projects in the emirate have not been spared either, feeling the rippling effects of the downturn, due to high building costs. In January, property developer Nakheel reportedly announced the halt of construction work on the Nakheel Tower, which includes the Trump International Hotel and Tower, Frond N villas, Gateway Towers and parts of the Waterfront and Palm Deira.
“Some of the projects have gotten delayed or abandoned for the time being, but till now there are no confirmed reports about hotel developments getting shelved,” says Eyad Ali Abdul Rahman.
“The demand for luxury properties remains strong in Dubai and the development of more hotels in this segment is based on the demand and return on investment. In recent years, there has been interest in the development of three- and four-star hotels.” So, does this signal a shift in the choice of accommodation among business travellers from luxury to mid-range due to company travel policies?
Christophe Landais, managing director, Accor Hospitality Middle East, explains: “Business trips are (getting) shorter and fewer.
“Business travellers (tend to) look for hotels that deliver the basics without the frills. He or she values comfort and (high) levels of service over unnecessary add-ons.”
Observing a trend towards an increasing demand from guests looking for comfort and convenience at value prices, John Bamsey, chief operating officer, IHG Middle East and Africa, notes the Middle East market, especially Dubai, lacks high-quality, internationally branded hotels which place an emphasis on quality at great value for money. “These days, business travellers and their companies think twice before travelling and lean to more value-for-money options. Travellers are looking for bargains when it comes to hotels and are now looking at limited-service hotels,” he says.
IHG’s limited-service brand Holiday Inn Express is fast expanding across Dubai and throughout the Middle East. Bamsey says that 20 properties are being planned in the region in the next five years. Just last year, two Holiday Inn Express-branded properties – Holiday Inn Express Dubai-Safa Park and Holiday Inn Express Dubai-Jumeirah were unveiled. IHG will have more openings in Dubai – among them, the Crowne Plaza Business Bay in 2010 and the Crowne Plaza International Media Production Zone (IMPZ).
Believing that savvy travellers will ultimately choose comfort over price, Bamsey says: “To continue strengthening our (IHG’s) position in Dubai, we will still focus on offering greater service and value for our guests... Given our size and scale, we do not have to resort to pure discounting and our focus is to ensure our guests receive great value for their money when they stay with us – for example, three nights for the price of two or complimentary room upgrades for our Priority Club Rewards members.”
French hotel group Accor also expanded its Middle Eastern portfolio last year, opening 10 hotels, half of which are in Dubai. They include properties under its economy Ibis and four-star Novotel brands: the 180-room Novotel Deira City Centre launched in March 2008, the 188-room Ibis Deira City Centre in November and the 480-room Ibis Al Barsha which opened last month.
Mid-range may finally have arrived in Dubai, but it’s not preventing the trend-setting and innovative emirate from dreaming big and attempting to realise its ambitions despite trying times.
The high-profile Emaar Hospitality Group is one determined operator. Claiming to be at the forefront of redefining “luxury accommodation”, it launched The Address Hotels and Resorts last year, whose flagship property, The Address, Downtown Burj Dubai opened in October. With a centrally located address to boot (located next to the Burj Dubai), the chic, 63-storey hotel features 196 rooms and suites as well as a host of corporate privileges such as complimentary wireless internet access, in-room check in, all-day access to the fitness centre, business lounge and club lounge, as well as flexible 24-hour accommodation sans charges.
Looking ahead, Dubai’s project pipeline is still expecting activity. Set to come online in the second half of the year is the 120-room Dusit Princess City Centre Dubai – Dusit International’s first Dusit Princess hotel outside Thailand – while the Palazzo Versace will feature the world’s first “refrigerated beach” controlled by a computerised thermostat system.
Dubai may be experiencing an unusual standstill in its business landscape. But it will be back. Failure is not an option for this feisty emirate.
