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Dubai hotels top Mena with highest profits

Dubai, January 31, 2013

Hotels in Dubai showed a monthly rise of 13.8 per cent in operating profit per room to $240.46 during 2012, marking them with the highest profits in the region for the third consecutive year, a report said.

Bottom line performance levels were boosted by a 5.2 per cent growth in Total Revenue per Available Room (TRevPAR) and a 4.9 per cent reduction in operating expenses, added the latest HotStats survey of full service hotels in seven Mena cities by TRI Hospitality Consulting.

Occupancy levels remained stable albeit a 0.8 percentage point increase to 84.6 percent, with Average Room Rates (ARR) rising 3.6 per cent to $322.93. The festive season spurred a growth in food and beverage and leisure revenues which assisted in driving the increase in TRevPAR to $497.19, the report said.

Abu Dhabi hotels continued in their struggle to lift key performance indicators which remained under pressure during the month of December despite a 6.7 percentage point increase in occupancy to 76 per cent, attributed to an influx of corporate and leisure demand.

Ongoing rate reductions, which are a by-product of the high competition in the capital, fuelled a 14.7 per cent reduction in ARR to $130.61. Although occupancy levels increased, the decline in ARR resulted in RevPAR falling by 6.5 per cent to $99.31 which impacted the bottom line by reducing the Gross Operating Profits per Available Room GOPPAR 9.7 per cent to $90.53.

“December figures for Dubai reflect the continued trend in 2012 as Dubai’s uninterrupted string of events, conferences, and festivals maintained a steady stream of demand allowing for GOPPAR levels to increase 13.8 per cent to $186.45,” said Peter Goddard, managing director at TRI Hospitality Consulting.

“However, hotels in Abu Dhabi have failed to capitalise on record guest arrivals as hotels continue to struggle with falling rates which have slashed bottom line performance by 18.1 per cent in comparison with 2011 figures.”

Hotels in Jeddah outperformed the previous year’s performance figures for the month of December as demand surged in the city. Hoteliers capitalised on an increased occupancy of 68.1 per cent with a 12.3 per cent increase in ARR to $229.07.

On the other hand, Riyadh’s hotel market performance wilted during the month of December, as occupancy shrunk 2.3 percentage points to 56.2 per cent, as new market entrants imposed a redistribution of demand. ARR dropped 1.2 per cent to US$260.73, reducing RevPAR 5.1 per cent to $146.42.

“New hotel openings in Riyadh are showing their impact on the market’s overall performance as new entrants compete with existing properties forcing a reduction in performance indicators,” said Goddard.

“This is likely to continue into to the New Year as a number of new properties including the Fairmont, Nobu Hospitality and Rosewood are all expected to open in 2013. Contrarily, Jeddah’s performance, driven by strong corporate and leisure demand, remained strong throughout the year, with bottom line profits increasing 24.2 per cent to $133.64 compared with 2011.”

Egyptian Hotels show continued signs of recovery with profit margins increasing over 25 per cent in December according to the survey.

Cairo hotels reported an 8.6 per cent increase in Revenue per Available Room (RevPAR) to $46.36, boosted by a 4.2 percentage point growth in occupancy, while hotels in Sharm el Sheikh followed a similar trend to Cairo with occupancy rising 8.3 percentage points to 60.2 percent. However ARR remained under pressure falling 4.5 per cent to $51.50, due to lower rates in third party agreements which drives demand in the coastal city.

“The growth in occupancy in both Egyptian markets is a positive sign as confidence from regional and international visitor’s return with Cairo and Sharm El Sheikh recording an 8.9 and 10.3 percentage point growth respectively from 2011,” said Goddard.

Monthly performance indicators for Kuwait hotels showed marginal changes in occupancy, albeit with a 0.1 percentage point increase to 53.8 per cent.

A severe reduction in group rates, which are exempt from the rate agreement, caused ARR and RevPAR to drop 9.9 per cent and 9.7 per cent respectively to $235.35 and $126.72. Substantial increases in food and beverage revenues enhanced TRevPAR 11.2 per cent to $324.87, lifting profits 15.1 per cent to $140.52.

“Occupancy levels remained stable in December, however the on-going political and civil unrest in the city has resulted in a 3.2 per cent fall in ARR during 2012,” Goddard added.

“This is attributed to a reduction in leisure demand which typically achieves higher average rates and has forced hoteliers to focus on the discounted tours and groups market in order to maintain occupancy levels. Fortunately for the Kuwait market, a growth in food and beverage revenues driven by a higher utilisation from local residents has helped hotels grow GOPPAR by 5.2 per cent to $140.72,” Goddard concluded. – TradeArabia News Service

Tags: Mena | Dubai | hotels | profits | Occupancy | 2012 |

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