Home Special ReportLuxury Cheaper suites and empty beds

Cheaper suites and empty beds

Financial crisis leaves businesses and tourists with less to spend on travel and accommodation

by Executive Staff

Luxury knows no limits at the Burj al Arab, the world’s only self-proclaimed “seven-star” hotel. The sail-shaped, suites-only hotel recently added four Rolls Royce Phantoms to its existing fleet of six, in order to pick up its high-end customers in style. With a price tag of $27,000 per night for its Royal Suite, the Burj al Arab is the flagship of the prestigious Jumeirah Group, which currently manages 11 hotels in Dubai, London and New York, while a further 14 outlets are under construction. By 2013 the group aims to have a portfolio of 30 luxury hotels.

Speaking at the Reuters Global Luxury Summit in Dubai, Jumeirah Chief Executive Officer Gerald Lawless played down the ripple effect of the global financial crisis, stating that visitors to the top-end hotel market “did not trade down.” Still, he admitted that the company was forced to cut jobs during the past nine months. It also froze recruiting — a measure the company said will only be reconsidered at the end of the year.

Dubai suffered a major economic downturn that has not left the hospitality sector unharmed. During the first quarter of 2009, the number of hotel nights spent in Dubai decreased by 16 percent to 3.87 million, according to the Department of Tourism and Commerce Marketing (DTCM), even though the total number of guests grew by 3.7 percent to 1.62 million. As visitors shortened their stays and hotels reduced room rates to stay competitive, revenues recorded a 15 percent fall to $854.9 million.

Tourists are traveling and spending less, while companies and multinationals have been forced to tighten their belts, sending their employees for shorter periods abroad and putting them up at less luxurious hotels.

Less cash doesn’t travel

According to the DTCM, three of Dubai’s key tourist markets (the United Kingdom, European Union and Russia) are in recession, which has led to reduced consumer and leisure spending. On a positive note, American tourists coming to the United Arab Emirates contributed $733 million to the local economy in 2008, up 85 percent when compared to the previous year. Still, average occupancy rates in Dubai hotels fell to 73 percent in the first quarter from almost 90 percent last year.

According to TRI Hospitality Consulting, January 2009 saw a 33 percent reduction in revenue per available room, and February a reduction of almost 40 percent. Occupancy rates in March improved, especially in Dubai’s beach hotels, yet seem to have come at the expense of room rates, as attractive offers were made to lure tour groups.

Lawless confirmed that key beach hotels saw occupancy rates of above 90 percent, yet conceded that room rates in Dubai had fallen by an average of up to 25 percent in the first quarter of 2009. He also said the Jumeirah chain had introduced a series of promotions.

Some positive signs were recorded in May, however, as passenger at the Dubai International Airport increased by 7 percent compared to the same period last year. Some 3.2 million people arrived, bringing the 2009 total to 15.9 million as of June 1. Dubai airport has attracted five new airlines in 2009, bringing the total to 130, which fly to more than 200 destinations.

Although the picture differs greatly by country, the global economic downturn has been less severe in the rest of the region. The same is true for the hospitality sector. The Syrian capital’s premier destination, the Four Seasons Hotel, hasn’t seen the extreme swing in rates or occupancy that has taken place in the Gulf. In fact, the hotel’s Director of Marketing and Sales, Julian Crane, expects a relatively strong summer ahead.

“The market in 2009 has experienced some decline in occupancy rates compared to 2008,” Crane said. “But it needs to be said that 2008 was an exceptional year for the hospitality industry here.”

In 2008, tourist arrivals in Syria increased by 15 percent to reach 5.9 million, some 56 percent of whom were Arabs, according to the Syrian Ministry of Tourism. Relatively, the number of Arab visitors actually fell by 13 percent. The uptick was the result of some 1.1 million non-Arabs, mainly Europeans and Iranians, visiting Syria in 2008.

With a daily rate of $366 for a double room and almost $9,000 for the Royal Suite, the Four Seasons is currently the business address of choice in Damascus. Yet competition is on the way with the announced arrival of the Kempinski hotel chain in the Syrian capital.

But the big luxury hotel chains are facing competition from a batch of recent boutique hotels opening in Damascus. Hotels like the Talisman and Beit Mamlouka in the capital’s old city are small but exquisitely rehabilitated old Damascene homes. Although the boutique suites may be more affordable, the rooms are booked for months in advance. Both hotels double room rates start at around $180, and suites are available in the $330 range.

Lebanon’s tourist arrivals in the first quarter of 2009 reached a record of around 434,000 which represents an increase of 57 percent compared to the same period last year. Summer traditionally is high-season, with lots of Lebanese expats returning, as well as Emirati, Saudi and Kuwaiti tourists. 

“Summer is peak season for tourism in Lebanon,” said Michelle Mallat Rishani, public relations and communication director at the landmark InterContinental Phoenicia hotel in Beirut. “Our main source market remains the GCC, and so far reservations have been very positive.” 

When Executive called in late June, the cheapest room available at the InterContinental was the $430 per night Phoenician class room.  The $15,000 per night Grand Royal suite was occupied, though. Prospective guests with deep pockets also have the option of the $9,000 per night Royal suite or the $5,000 Presidential suite.  

Mallat is confident business will continue to boom this summer, and that arrivals will be boosted by the fact that Lebanon has become a more accessible and convenient destination with more major carriers offering routes to the country, as well as the recent addition of low cost airlines such as flydubai and Jazeera Airways.

With the Lebanese elections passing without major incident, Lebanon’s Ministry of Tourism believes the country is to receive two million visitors in 2009, which would set a new record and could contribute some $2.5 billion to the country’s economy.

Support our fight for economic liberty &
the freedom of the entrepreneurial mind

Executive Staff


View all posts by

You may also like