New hotel projects to intensify competition

The competition in the hotel industry is expected to intensify due to influx of new projects coming online in the region that will outpace the demand and pose a serious challenge to hoteliers to maintain their profitability, according to a senior hotel executive. Tilal Liwa Hotel’s general manager Ayman Ashor said Dubai and Abu Dhabi are interesting case studies to show how hotel markets can cope with balancing demand and supply to maintain profitability. “Increasing room inventory has been a dominant factor influencing performance in the past and will continue to do so as the region remains attractive for hotel owners and operators,” Ashor told Khaleej Times during an interview. The Abu Dhabi-based four-star deluxe property, managed by Danat Hotels & Resorts — a division of National Corporation for Tourism and Hotels, recorded a steady business growth in first half with 70 per cent occupancy, out of which about 30 per cent were leisure individual and group bookings including online channels. Confident in positive 2012 Ashor is confident of closing the year 2012 on a positive note despite a challenging business environment in the wake of new projects coming online, declining rates, unrest in the region and slowdown in global economy. “In spite of minor setbacks during the onset of the Arab Spring last year due to the political situation, we are proud that all our statistics remain positive, except for comparatively low volumes in leisure travel this summer as compared to the previous years.” “We look forward to ending the year on a positive note and hope that the 2012 experience will help us plan better in the years to come,” he added. The 111-room hotel, located at the edge of the majestic Rub Al Khali desert, is considered an ideal destination for a weekend desert escape, especially for families in the UAE. The hotel serves leisure, corporate and public sectors as the government is giving special attention to Abu Dhabi’s Western Region, where a lot of development projects and infrastructures are currently taking place. “Our first quarter performance was very good as we managed to achieve our target by focusing on leisure guests, local tourists and the international market. The hotel also performed well in the corporate segment as we’ve organised several big events in our hotel and all of them were very successful,” Ashor said. “Overall, Tilal Liwa Hotel’s revenues went up by one per cent in the first quarter of 2012. The key performance indicators showed a positive increase in the number of guests. In terms of revenues, there was a 10 per cent increase in guest nights and 20 per cent rise in the average length of stay for the first three months of the year,” he explained. In reply to a question about the improvement in occupancy levels, he said the impact on revenue per available room performance has been quite different as there has been growth in occupancy compared to 2011, but in the online, weekend and leisure segments. “This is mainly due to the shift in business trends from customers using different booking means such as online booking websites, mobile/tablet applications and social group buying sites. This has also contributed in increasing the food and beverages as well as health club revenues,” he said.Challenges to profitability To a question about the increased competition, Ashor said the guests in general are now expecting the best for less while hotel running costs are increasing. “There are ongoing challenges to maintain profitability while keeping a high service standard and guest satisfaction. Even if the number of visitors increases in 2012, hoteliers will not realise any growth due to additional hotels in the current inventory. “The number of new hotels coming online does not match the current number of visitors and we are certainly reaching and feeling an oversupply of hotel rooms. “With the influx of new hotels opening, the competition will be very tough in 2012. However, I believe it is not as big an issue as everybody thinks. It boils down to advanced and smart planning, knowing the market and devising effective strategies,” he added. To a question on demand for upscale segment, he said although the region is often associated with big names in luxury hotels and iconic five-star properties, the mid-market segment has brought diversity to a market that would otherwise have alienated a hefty proportion of business and leisure tourists.“Budget hotels have established quite a reputation in the Middle East over the past two or three years, moving quickly from being an emerging product to an entire market segment, meeting the increasing demands for lower-priced but quality accommodation,” he said. About the mid-scale or low-segment hotel brands, Ashor said: “The UAE market is different, largely due to the fact that the customers here are accustomed to the luxuries of the upscale segment and expect more from their budget experience. Therefore, the mid-scale properties must continue to sustain its current market status.” In reply to a question about the expansion plan, he said National Corporation for Tourism and Hotels is expanding its range of Abu Dhabi hotels and resorts through the development of luxury hotels within the next three years, as Abu Dhabi is planning to become the region’s business travel and tourism destination of choice. “National Corporation for Tourism and Hotels is working on developing various Abu Dhabi luxury hotels and resorts including Hotel Le Bristol, Grand Millennium, Saadiyat Island and Nareel Island,” Ashor concluded. From:Khaleej Times