Nigerians, other countries shun Dubai due to tight dollar rate

The Hotel occupancy rate in Dubai has dropped by five per cent in February due to the strengthening of the US dollar in Nigeria and other countries where Dubai’s visitors mostly come from. This was revealed in a research conducted by a United Arab Emirates based, Gulf News.

According to the report, Dubai’s hotel sector is currently facing headwinds, with the average hotel occupancy averaging at 86.2 per cent last February, which is two percentage points lower than in February 2014.

The report says that analysts in the hospitality industry also attributed the drop in the occupancy rates to the strengthening of the US dollar in Nigeria and other developing countries. They also linked the drop to increased supply of hotel rooms

It however confirmed that the popular attractions in Dubai, including the musical fountain, Dubai Mall, Burj Khalifa and other major landmarks are still attracting hundreds of visitors each month. Adding that tourists are not checking into hotel rooms as they used to.

It said, “Revenues don’t look promising, either, with the revenue per available room (RevPAR), a key indicator of financial performance in the hospitality industry, also declining by 7.7 per cent year on year last month, the ninth consecutive month of decline.

The value of the greenback has gone up against a number of currencies, including those. This has consequently eroded the purchasing power of a number of Dubai’s visitors.

“Many of the key markets for Dubai are emerging markets which have been particularly hard hit by currency weakness relative to the USD,” Emirates NBD said.

Adding to the pressure on occupancy rates, the hotel sector in Dubai is seeing more hotels entering the market. Dubai wants to keep adding more hotel rooms until 2020.

As of January 2015, 38 new hotels were under construction, representing 16 per cent of the current room supply. The number of hotel rooms went up by 6.8 per cent last month compared to a year earlier, while the total supply last year increased by 7.8 per cent year on year.

STR Global’s data showed that around 11,000 more rooms are still in the planning or final planning states, so the supply is expected to expand further.

“As the authorities are targeting a doubling of hotel room from 2012 to 2020, this trend is set to continue,” said the bank.

Alper Can Bulcum, cluster general manager of Ramada Plaza Jumeirah Beach Residence and Ramada Sharjah, told Gulf News, that they saw a slight drop in occupancy in February but they added that they were able to maintain "good business."

Bulcum said, "One of the reasons for the business drop in this area of Dubai was the decrease in the number of tourists from the Commonwealth of Independent States (CIS) market which is normally at its peak during these months.

"There is also the shift of school holidays to March from Kuwait. The [other] markets [like] Egypt and Turkey are targeting similar markets with Dubai, promoting better weather, beaches."

Habib Khan general manager of Arabian Courtyard Hotel and Spa, told Gulf News  that  occupancy rate dropped by about 5 per cent compared to last year in his hotel. According to him, inventory has increased in Dubai which had taken the share. He added that the Euro drop also affected the European market which was key during the month," Khan.

"Egypt tourism is reviving and taking market share. Gulfood [an annual food and hospitality show in Dubai] wasn't that busy as it used to be. All these factors affected the occupancy."

In comparison, the hotel sector in Abu Dhabi is not facing serious challenges. The revenue per available (RevPAR) room in Abu Dhabi grew by an “astonishing” 29.2 per cent last month compared to a year earlier, while occupancy rate rose by 1.22 percentage point to 80.6 per cent.

“The trend evident in Abu Dhabi has been one of rising occupancy rates and RevPAR, despite a stronger USD. We also note that the supply of hotel rooms in Abu Dhabi has grown at a faster pace than in Dubai (11 per cent year on year in February 2015 and 11 per cent for the full year 2014).

The bank, however, noted that there are fewer hotels in Abu Dhabi, about less than one third the number in Dubai. The UAE capital’s RevPAR is also 33 per cent lower than in Dubai.

Emirates NBD, however, pointed out that the 86.2 per cent hotel occupancy in Dubai last month is still within “healthy” levels and slightly higher than January’s 85.8 per cent.