Economic slowdown deals painful blow to Mideast hospitality industry

Dubai: The Middle East's hospitality industry witnessed a decline in occupancy rates and revenue per available rooms (RevPARs) in key markets during the first four months of the year as the global economic slowdown impacted the inflow of tourists and business people into the region, an industry expert said.

"The Middle East to a large extent has been impacted by low levels of economic activity around the world. The region suffered a 9.6 per cent fall in occupancy rates and 14.9 per cent in RevPAR," Robert O'Hanlon, Tourism, Hospitality and Leisure Partner at Deloitte Middle East, said.

He said in the Middle East, Dubai experienced a significant decline of 16 per cent in occupancy and RevPAR of 34.5 per cent during the first four months to April 2009 when compared to 2008, based on data provided by STR Global.

"Dubai is challenged by continuous supply of new hotel rooms. Demand generation efforts continue to play an important role in marketing strategies of hoteliers. After a year of long history of growth, Abu Dhabi also witnessed a dip in occupancy of 6.6 per cent but registered a growth in RevPAR of 10.5 per cent during year to April," O'Hanlon said.

He said, during the past few years, the UAE had invested in improving tourism and related infrastructure in the region. New hotels are being added to the supply pipeline.

"The decline in the industry can be attributed to the effects of the economic slowdown. The decrease in occupancy rates is further amplified due to continued new supply of hotel rooms, but the region has again performed much better than other regions around the world," Ghassan Aridi, CEO of Alpha Tours, said.

He said the impact of the global slowdown has affected inflow of tourists and business people to the region. Lower demand coupled with increase in supply of tourism infrastructure was the main cause. The situation is expected to improve during the coming years as hotel operators in the region are committed to attracting tourists by offering attractive value packages to tourists worldwide.

He said the period of watching and waiting is slowing down and the tourists are slowly starting to spend.

"I am confident that Dubai will overcome the crisis. We had very bad expectations at the start of the year. But right now it [this year] will be much better than expected, but the revenues and volume will not be the same as last year."

"Alpha Tours registered a 12 per cent fall in tourists in the first quarter of this year and expects only a five per cent fall in tourists due to the shopping festival season which has just begun last week.

"A strong rebound in the tourism industry is expected by year-end as Dubai's tourism department and the government in particular is keen to attract more tourists into the UAE by offering special promotions," he said.

In April, UAE's occupancy rates fell 13 per cent to 73 per cent while average daily rate (ADR) fell 15.1 per cent to Dh1,000.87 and RevPAR fell 26.1 per cent to Dh730.18.

Meanwhile, Jeddah experienced an increase of 3.7 per cent in occupancy rates and 28.2 per cent in RevPAR. This could be attributed to the continued growth in economic activities in the region.

Beirut, the best performing market in the region, is experiencing a significant inflow of visitors to the area as a result of Lebanon's return to stability.

The year to date April 2009 trends when compared to 2008 reflected an increase in occupancy of 83.6 per cent and RevPAR of 155.1 per cent.

Tourism activity in Lebanon has increased by almost 56 per cent in the first four months of 2009. Lebanon attracted almost 41 per cent of its tourists from Arab countries.

Oman, one of the fastest growing regions in 2008, also experienced a decline in occupancy of 19.8 per cent and RevPAR of 6.3 per cent.

"A further fall in occupancy and ADR in the UAE and Middle East will be determined by a combination of the continuation of the global economic recession.

"Given the Middle East's mixed tourism results, the year ahead will, no doubt, be challenging. Stakeholders in the hospitality industry in the Middle East will have to ensure that their marketing and publicity efforts continue, and should look towards tapping tourism demand from emerging markets," O'Hanlon said.