Abu Dhabi: a missed op­por­tu­nity?

Ali Man­zoor, as­so­ciate part­ner, Hos­pi­tal­ity and Leisure, at Knight Frank, helps us draw the lines that il­lus­trate Abu Dhabi’s hos­pi­tal­ity scene

Hospitality News Middle East - - IN THIS ISSUE - The role of the na­tional car­rier knight­frank.ae

Ac­cord­ing to the De­part­ment of Cul­ture and Tourism – Abu Dhabi (DCT) a record 4.8 mil­lion peo­ple stayed in the emi­rate’s 162 ho­tels and ho­tel apart­ments dur­ing 2017, a 10 per­cent in­crease year-on-year (y-o-y). Abu Dhabi en­joyed the strong­est growth in the travel and tourism spend­ing and GDP in the re­gion, ac­cord­ing to the World Travel and Tourism Coun­cil (WTTC), and was named the fastest­grow­ing of all cities out­side Asia over the past decade in the study. De­spite these pos­i­tive num­bers, how­ever, slower growth is ex­pected for the next 10 years, with the oil cri­sis the rea­son be­hind this in­sta­bil­ity.

Over­sup­ply on the hori­zon

While most were cau­tiously op­ti­mistic about the re­cov­ery of Abu Dhabi’s hos­pi­tal­ity sec­tor be­tween 2012 and 2015, the spec­tre of forth­com­ing sup­ply was al­ways an area of con­cern for many an­a­lysts. These con­cerns were soon sub­stan­ti­ated, as nu­mer­ous sup­ply de­liv­er­ies over the fol­low­ing two years re­sulted in per­for­mance de­clines across the cap­i­tal. This trend was fur­ther ex­ac­er­bated by the fact that the wider mar­ket was be­ing dragged down by eco­nomic un­cer­tainty and de­clin­ing cor­po­rate visi­ta­tion. As a re­sult, 2016 and 2017 were char­ac­ter­ized by a wide­spread soft­en­ing in per­for­mance across the cap­i­tal, which was pri­mar­ily at­trib­ut­able to a de­cline in achiev­able rates rather than oc­cu­pancy lev­els. In­deed, de­spite the fact that visi­ta­tion num­bers were in­creas­ing over this pe­riod, the de­cline in av­er­age rates was sub­stan­tial enough to off­set any per­for­mance up­side. This was par­tially at­trib­ut­able to the source of the de­mand growth; China was (and re­mains) the largest and fastest-grow­ing in­bound source mar­ket to the emi­rate of Abu Dhabi. Given the fact that much of this de­mand has price-sen­si­tive at­tributes, many ho­tel op­er­a­tors felt that they could only com­pete with each other on rate.

Dif­fi­cult ho­tel op­er­at­ing conditions

The hos­pi­tal­ity team at Knight Frank has un­der­taken a sub­stan­tial num­ber of ho­tel val­u­a­tions in Abu Dhabi in re­cent years, and, as such, has had sight on how ho­tels have been af­fected by mar­ket conditions in real time through an­nual val­u­a­tions. What is clear is that many ho­tels have had a rigid cost struc­ture, and, as a re­sult, have not been able to re­act suf­fi­ciently to rapidly chang­ing mar­ket conditions. In some cases, we have seen prof­itabil­ity ra­tios de­cline by over 20 per­cent in a span of just three years, and such sit­u­a­tions have been a bit­ter pill to swal­low for as­set own­ers. While the first in­stinct of some is to cut pay­roll, most un­der­stand that do­ing so is a short-term so­lu­tion; in­stead many are look­ing at al­ter­na­tive ways to drive rev­enue, or in some cases, to en­hance ef­fi­cien­cies in util­i­ties ex­pense, which has been a sub­ject of great in­ter­est in re­cent years.

New des­ti­na­tions to drive foot­fall

One short­com­ing that Abu Dhabi has con­tin­u­ously had to deal with is the lack of cred­i­ble de­mand gen­er­a­tors, par­tic­u­larly those which are com­pelling enough to stim­u­late room-night de­mand from the leisure seg­ment. His­tor­i­cally, visi­tors to the cap­i­tal would be able to visit ma­jor sites in a sin­gle day, and be­yond Yas Water­park, Yas Arena and Sheikh Zayed Grand Mosque, there were few other at­trac­tions to visit. How­ever, with the de­liv­ery of Yas Mall, the Lou­vre and the up­com­ing Warner Brothers Theme Park, prop­er­ties are in a stronger po­si­tion to con­vert these day trips into room-night de­mand. Eti­had Air­ways is also an im­por­tant con­duit for the cap­i­tal’s hos­pi­tal­ity sec­tor, and it is in­ter­est­ing to see new ini­tia­tives be­ing car­ried out by the air­line which are clearly de­signed to stim­u­late Abu Dhabi’s hos­pi­tal­ity mar­ket. The of­fer of com­pli­men­tary ho­tel ac­com­mo­da­tion for many pas­sen­gers with a stopover in Abu Dhabi is a great ini­tia­tive to reach po­ten­tial guests who may not have pre­vi­ously con­sid­ered the emi­rate as a tourist des­ti­na­tion.

The of­fer of com­pli­men­tary ho­tel ac­com­mo­da­tion for many pas­sen­gers with a stopover in Abu Dhabi is a great ini­tia­tive to reach po­ten­tial guests

While we do ap­pre­ci­ate that the mar­ket has a chal­leng­ing op­er­at­ing en­vi­ron­ment, in the short-to-medium term, given the com­par­a­tively mod­est sup­ply pipe­line and var­i­ous govern­ment ini­tia­tives, we be­lieve that the long-term out­look is broadly pos­i­tive.

Kha­lidiya Palace Ray­haan by Rotana

Newspapers in English

Newspapers from Lebanon

© PressReader. All rights reserved.