14
7DAYS
WEDNESDAY MAY 13, 2009
www.7days.ae/business
The eye of the storm
The Middle East travel industry is still one of the best performing markets
in the world, but it has not been immune to the global downturn.
Shane McGinley looks at the challenges being faced, some of
the strategies being adopted and some potential solutions
I
n a galaxy not far, far away men (and women situation, Qatar Airways’ CEO Akbar
and children) often boldly went where no Al Baker, whose press conference
man had gone before. Luxurious hotel rooms style is reminiscent of Ryanair’s
were packed with eager tourists, decked out in Michael O’Leary, said at the
every shade of skin colour and fashion recent Arabian Travel Market.
accessory. Planes took off and raised the Speaking of low frills airlines,
carbon footprint in ever increasing numbers. Al Baker said that his airline
Travel agents flooded the market with glitzy had taken a proactive
brochures and developers joined forces with approach and proclaimed
five-star hotel brands. that if their market share
Dubai Department of Tourism and Commerce was threatened by any
Marketing (DTCM) heralded the fact that last low fares airline they
year 7.5 million guests stayed in the emirate. already had a plan in
Then the meteor that was the credit crunch place to launch their
struck. The finance and banking model went own low fares product
3.6%
into economic meltdown and suddenly people within 90 days. “We
Drop in tourism’s
were more worried about keeping their jobs already have a test
and securing their life savings than planning airplane flying but share of GDP
the next ski or sun junket. under the guise of a
“People in the UK spend more time full service aircraft,”
researching their holiday than they do their he said, which is
mortgage,” said Nigel Pocklington, Middle something to look out
Eastern managing director of Hotels.com. on your next Qatar
“Which you could say is why we are in this Airways flight.
mess,” he adds. Hoteliers cannot take
A report by Deloitte found that revenue per such drastic action,
available room (revPAR) in the Middle East fell but are adopting
12.9 per cent to $142 in the first quarter of the different and often new
year and occupancy levels sunk nine per cent. approaches. Holger
Alex Kyriakidis, global managing partner of Schroth, general
tourism, hospitality and leisure at Deloitte, manager of the
said that “consumer and business spending is Kempinski Hotels and the
in sharp decline, with less spend available for Mall of the Emirates said
travel. The weakening economy here and that this year the company 12%
across source markets is hurting hoteliers”. is not just selling the hotel,
Tourism’s contribution to gross domestic but an entire experience.
Increase in Dubai
product is expected to contract by 3.6 per cent “This year we went together
this year according to the World Travel and with the Mall, Ski Dubai and
hotel prices in 2008
Tourism Council. Magic Planet on a GCC
While hoteliers in the UAE still managed good roadshow to sell the place as a
revenue and occupancy levels, Deloitte destination,” says Schroth, “you can
reported that overall they were dealt a blow by go there to sleep, eat breakfast, have a
Dubai, which dropped 36 per cent, the fastest good time and maybe go skiing”.
revPAR declines in the Gulf. His aim is to sell the hotel as an all round
The drop in Dubai’s revPAR has also seen destination that appeals to the whole
supply being scaled back. A report by CB family and is not determined by the weather.
Richard Ellis forecast that it is unlikely that the Kempinski’s approach is always to attract local
number of new hotel rooms will rise above clientele, as it leaves them less susceptible to
22,000 over the next five years, which is only global shifts in the market. This appears to
around 30.8 per cent of the supply planned have worked in Dubai, where Schroth says 75 by
during the starry-eyed boom era. per cent of their guests are from the GCC. 2012,
Deloitte believes the drop in Middle East hotel Global hotel brands are not immune to local which is
occupancy rates began to take effect in the conditions around them and hoteliers have to an increase
final quarter of last year. Occupancy rates were react differently to their differing settings. This of around
21%
at 70 per cent in October 2008 but by January was especially obvious when speaking to the 400 per cent.
Hotel staff laid off
this year had dropped to 60 per cent. general managers of the Four Seasons hotels in Casson reports that in
Robert O’Hanlon, tourism, hospitality and Doha, Qatar and Riyadh, Saudi Arabia. the first quarter they are in last 12 months
leisure partner at Deloitte Middle East says “Nowhere hasn’t been impacted, we have been doing about eight per cent less
that hoteliers “must resist the pressure to slash insulated but not immune,” said Simon Casson business. About 95 per cent of their
rates and provide a lesser-quality service. The from the Four Seasons Hotel in Doha. business is corporate and about 70 per
strategy for the tourism industry this year is to While Qatar is one of the richest countries in cent of guests are from outside the GCC, which
focus on survival”. the world, the main factor in Doha has been a leaves the hotel susceptible to global budget In Riyadh,
The Hotels.com Hotel Price Index (HPI) found recent surge in supply. This is set to continue cuts in travel and hospitality. Rami Sayess said the
that Dubai is one of the most expensive cities as the Qatar Tourism and Exhibitions Authority The hotel has not made any redundancies and situation is very different and the hotel actually
in the world to visit. Even though Dubai’s revealed plans to increase its hotel capacity has not reduced its room rate, therefore in registered growth. “We had the best first
revPAR is declining, average prices during the from 7,000 luxury rooms to over 29,000 rooms order to adjust to the extra competition and quarter in the last seven years,”said Sayess
last quarter of the year rose 12 per cent to reduced business Casson has had to cut costs. proudly about his occupancy levels.
$258.289 on average per night, according to “HOTELIERS MUST RESIST THE Consulting staff, he reports that some things Last year the hotel saw growth of 30 per cent
the HPI, and is now the third most expensive
destination after Moscow and New York.
PRESSURE TO SLASH RATES AND
have been reduced, such as the soda machine and so far revenue is up three per cent for the
in the staff room being replaced with a water first quarter. Sayess also said he hired 28 new
As the financial model crumbles and the end PROVIDE A LESSER-QUALITY cooler, which he says saved nearly $100,000. staff and that the Riyadh hotel was now one of
of the first decade of the third millennium
SERVICE. THE STRATEGY FOR
In the front of house, the flower arrangements the top hotels in the Four Seasons group.
approaches, is the tourism model in need of a
reboot and how is the travel industry evolving
THE TOURISM INDUSTRY THIS
have been less excessive. Four Seasons has There are some changes he has noticed and in
always been renowned for its flower April things began to slow down and corporate
with the new challenges and conditions?
YEAR IS TO FOCUS ON SURVIVAL”
arrangements, which have remained, but guests began turning their back on extravagant
The ability to adapt and react to market Casson said now they have been reduced in shows of wealth and for transport clients now
conditions is the best way to approach the
ROBERT O’HANLON, DELOITTE
less prominent areas of the hotel. don’t want a BMW or a Mercedes but are
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