Ho­tel firms face ob­sta­cles

7 Days in Dubai - - BUSINESS - Shoshana@7days.ae

Dubai faces a chal­lenge to pro­vide enough ho­tel rooms for the grow­ing num­ber of mid-mar­ket tourists the emi­rate is seek­ing to at­tract, in­dus­try ex­perts have said.

The city is aim­ing to bring in mil­lions more mid­dle-in­come vis­i­tors by 2020, with the In­dian and Chi­nese mar­kets among the prime tar­gets.

Com­men­ta­tors at The Ho­tel Show Dubai this week said es­tab­lished chains such as Emaar and Rotana are in­vest­ing in at­trac­tive three and four-star ho­tel of­fer­ings – the Rove and Cen­tro brands re­spec­tively.

But they said other firms are find­ing it dif­fi­cult to break into the mar­ket, or are re­luc­tant to do so over con­cerns about the prof­its they may make.

Price­wa­ter­house­Coop­ers (PwC) said in a re­port in April that just 20 per cent of Dubai’s ho­tel stock was classed as one to three-star, com­pared with 22 per cent four-star and 32 per cent five-star.

A sep­a­rate mea­sure means about half of the city’s ho­tels are classed as four and five-star in con­trast to New York, which has just 11 per cent, Lon­don, which has 12 per cent, and Hong Kong at 24 per cent.

In to­tal, there were about 98,300 ho­tel rooms in Dubai, PwC said in April.

Vikram Loomba, Di­rec­tor of Real Es­tate Hos­pi­tal­ity and Leisure at PwC, said: “Dubai has spent the last decade es­tab­lish­ing and mar­ket­ing it­self as a ‘lux­ury’ des­ti­na­tion, how­ever, with grow­ing im­por­tance of emerg­ing mil­len­nial trav­ellers, global trav­eller trends have shifted dra­mat­i­cally.

“In or­der to cater for the 25 mil­lion tourists ex­pected for 2020, Dubai will need about 25,000 to 35,000 new mid­mar­ket ho­tel rooms.”

He added: “The mil­len­nial trav­ellers are the key tar­get mar­kets for most of the ma­ture and up­com­ing travel des­ti­na­tions glob­ally. These trav­ellers range be­tween the ages of 18 and 34 and con­trib­ute al­most $200 bil­lion to $300 bil­lion in an­nual spend­ing world­wide – num­bers too large to brush aside.”

Grant Sal­ter, Head of Travel, Hos­pi­tal­ity and Leisure Ad­vi­sory in the Mid­dle East Re­gion for Deloitte, said there is no short­age of sup­ply for those new ho­tel rooms once built.

He said Dubai Tourism is tar­get­ing China and In­dia and fam­i­lies in an ef­fort to brand it­self “the new Or­lando”.

He added: “Within the next 18 months to two years there is a sea-change in terms of the of­fer­ing from a tourism in­fra­struc­ture per­spec­tive that is talk­ing to that mid-mar­ket sec­tor.”

Yet Dubai’s hos­pi­tal­ity sec­tor is strug­gling to ride the huge wave of po­ten­tial growth in the mid-mar­ket sec­tor due to the high price of land and con­struc­tion costs, Sal­ter said.

He added: “You’ve got two ma­jor com­po­nents; your cost of con­struc­tion and your price of land. Ac­ces­si­ble, qual­ity land in good lo­ca­tions is ex­pen­sive. So you put those two to­gether with a rel­a­tively lower price-point for a mid­mar­ket prod­uct – around $150 – and the maths doesn’t work.

“Un­less there’s some meet­ing of minds be­tween the land owner and the po­ten­tial de­vel­oper on the shar­ing of the risk re­lated to the land value, it’s go­ing to be very dif­fi­cult.”

He said large ho­tel firms that bought land in the past are able to over­come that chal­lenge.

Sal­ter said: “Emaar has some­thing in the re­gion of eight or nine Rove ho­tels that will open in the next three or four years. They can do that, they’ve got the for­mula now and it works.

“Also Rotana’s Cen­tro brand is start­ing to take hold in the mar­ket – and it’s a great prod­uct.”

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