Dubai: Holiday home businesses in Dubai are the latest to feel the ill-effects of the coronavirus outbreak, leading to cancellations and weak bookings this month.
“January and February are normally peak season where we see lots of Europeans travelling to enjoy the weather,” said Vinayak Mahtani, CEO of bnbme. “But now, we are seeing a reduction in occupancy through cancellations that we are refunding guests for. All general enquiries have also dropped.”
Mahtani is philosophical about the turn of events. “There’s been a massive impact on the entire economy - it’s only natural that this is affecting the holiday homes segment.”
GCC travel bans
There has been a drop in GCC travel due to the bans to place from Kuwait and Bahrain. With the first quarter prospects wiped out, the industry is turning its attention to the second-half of the year.
Mahtani reckons the second part will be a busy period, especially summer. He has already started rolling out “staycation” offers for local UAE residents who are not travelling to come and enjoy the holiday home hospitality.
“So if you can’t get out of the UAE, have a vacation locally; this is seeing us improve occupancies… to an extent,” he added.
Last week, Germany’s ITB Tourism Fair – the world’s largest tourism fair -- was cancelled due to the virus spread. Around 160,000 visitors were expected to attend.
At the local level, “There has been a considerable drop in future bookings and a lot of the corporate demand we were getting from Chinese companies have also slowed down,” said Khurram Shroff, Chairman IBC Group & Gallery Suites. “Everyone is waiting to see what happens next with.”
How low could rates go?
The holiday home businesses are fretting about the pressure daily rates are now under because of the slow bookings and cancellations.
Thomas Dolezal, CEO of Elite Royal Apartments, reckons the businesses will need to see some improvement in another four to eight weeks. If not, “It could prove to be difficult to cover operating costs, especially for smaller newer operators who do not have access to external financing [and] may run into cashflow problem.
“My expectations is that larger players will wait out the storm, perhaps with external financing support and then recover during Expo 2020 Dubai.
“However, the holiday homes sector is set for a big profits this year due to Expo; so creditors should be reasonable and in the worst-case scenario they should wait out the storm with the operators. And recover with some premium later during the Expo.”
Force majeure in place
For Shine Sunny, CEO of Raine and Horne Holdiay Homes, the cancellations could come in March. The company saw a fairly healthy booking slate in January and February “Platforms such as Airbnb and booking.com have already applied the clause of force majeure, which is usually done in times of a natural calamity,” said Sunny. “So tourists coming from places such as China can now automatically cancel their bookings and they will be given a 100 per cent refund.
“Different holiday home companies might have different cancellation policies, but in this case we have no choice. Usually the period between December and Ramadan is a good time for business - but this year that doesn’t look to be the case.”
Raine and Horne operates 55 apartments and still confirms 80 per cent bookings at these properties. “People are waiting and watching. I just got a mail from a Russian client who wanted to cancel as she didn’t want to endanger her family’s health.
“The trends might pick up now only in October.”
But Abdul Khader, manager at Super Elite Holiday Homes Rental, said that there have been no enquiries from January onwards for its luxury units. It operates 20 holiday homes in Dubai Marina and the Palm.
“Normally, we have 100 per cent occupancy in the first quarter - but now it’s less than 20 per cent," he said. "December was also low on occupancy. We were already battling a slow property market.
"We had hopes that 2020 would be a good year - but now no one is traveling.”
Operational for the last five years, the company is now thinking of closing the holiday home unit. “Our average rates of Dh1,200 a night have now gone down to Dh500 per unit.”