As international arrivals drop, hotels are turning to the domestic market and ancillary revenue streams such as restaurants to cushion the blow.
Tourism was among the first sectors hit when the conflict erupted, grounding flights across the region and leaving visitors stranded in hotels.
In January, Dubai’s 827 hotels recorded average occupancy of 86 percent, according to data from the emirate’s tourism department. While official figures for February and early March have yet to be released, one consultant in the city said occupancy has fallen to about a quarter of this.
“Hotels need to sell from the top down. If demand is only at 20 or 30 percent, that 20 to 30 percent must be optimised,” Judith Cartwright, CEO of hotel commercial strategy firm Black Coral Consulting told AGBI.
She added that a race to the bottom should be avoided.
“My advice to hotels would be not to go into a crazy price war. It damages brand integrity. Following Covid, Dubai did a great job positioning itself on a much higher level,” she said.
“Hotels won’t help each other if they go into a price war now.”
At the start of this year, Dubai’s hotel rates were up 17 percent to AED775 per night, according to Dubai Tourism data.
Accurate data on average daily rates (ADRs) hasn’t been published yet, but an AGBI review of online travel operators’ sites show prices this week in luxury hotels typically fell below this average.
Fairmont The Palm, which made global headlines for a fire caused by drone debris on the first day of attacks on February 28, is charging AED900 this weekend for a stay with breakfast. Operator Accor declined to comment for this story.
Mamoun Hmidan, chief business officer at regional online travel agency Wego, told Dubai Eye Radio this week it has seen rates drop by as much as 40 percent for some Dubai hotels.
Most operators AGBI reached out to declined to comment or did not respond. Media One Hotel general manager Mark Lee, however, did shed light on current conditions.
“It’s a bit like groundhog day from six years ago,” he said, referring to Covid-19. “There are little to no people coming in, unless they are returning residents. It’s all about residents or catering to long-stay.”
“Hotels are being told not to raise prices for anyone extending stays. The directive from Dubai Tourism was to maintain rates,” he said.
But there are extremes. Cartwright warned against hotels offering enormous discounts to drive short-term business.
“To avoid a price war, the focus needs to be on what experiences a hotel can provide. Offering the room rate redeemable on F&B [food and beverage] may work in the short-term, but long-term, it just damages the whole market,” she said.
“Hotels have a responsibility to keep integrity. The lower you go, you attract the wrong type of clientele. So many hotels are in a panic mode,” she added.
One hotel offering such a deal is FIVE Palm Jumeirah, which declined to comment. The next door hotel, Hilton Palm Jumeirah, which is offering a similar promotion, also declined.
Like pandemic times, hospitality professionals are shifting to the domestic market to keep business going. “Unlike the pandemic, at least we can keep the bars open, that keeps the local market going,” said Lee.
Cartwright added that she has seen strong occupancy levels for local residents in far-flung desert hotels in Dubai, those located far from any potential attacks.
Natasha Hatherall-Shawe, founder of communications agency TishTash, told AGBI that hotels she is working with are banking on local support.
“The sector here has historically proven very resilient, and many businesses are using this period to strengthen local relationships and build loyalty within their immediate catchment areas.
“When visitor numbers return, those venues that have maintained community engagement and visibility are likely to be in the strongest position to recover quickly.”
Dubai Tourism said in a statement to AGBI that “the safety and welfare of citizens, residents, and visitors is the UAE’s highest priority”.
“As part of Dubai’s established response frameworks, measures have been implemented across the tourism and hospitality sector. Hotels have been requested to support affected guests by facilitating extensions to stays under existing booking conditions,” the statement said.
By Josh Corder
