Source market dynamics to hit UAE hotel revenues
LONDON, January 9, 2019
The UAE hospitality sector's revenue levels are expected to weaken over 2019, owing to the changing nature of room night demand and sustained development pipeline, according to global property consultancy Knight Frank.
Market performance has continued to deteriorate in the UAE's hospitality sector with occupancy falling by 2.0 per cent, average daily rate (ADR) by 5.8 per cent and revenue per available room (RevPAR) by 7.7 per cent in the year to date to November 2018, compared to the same period a year earlier, the expert stated citing data from its Property Monitor Index.
This is despite visitation to the UAE continuing to increase. But in light of a more cash-constrained guest profile, hotels have had to price more competitively in order to maintain market share. This indicates that weaker key performance indicators (KPIs) are not related to occupancy issues but due to the changing nature of source markets visiting the UAE, it stated.
From an operational perspective, in a market of softening performance, Knight Frank said it is seeing an increasing number of hotel owners scrutinise operators more critically than ever, and this has most often come in the form of operational reviews, enforced headcount reduction, or even termination.
According to the expert, over the past year developers have been increasingly moving away from traditional management contracts, instead choosing to explore franchise agreements as a means to drive profitability.
In some instances, operators have willingly converted management agreements to franchise agreements regardless of contractual obligations if the necessary prerequisites are met, it added.
Looking ahead, Knight Frank anticipates that the changing nature of room night demand and sustained development pipeline will result in RevPAR levels weakening over 2019.
The RevPAR decline will continue to be attributable to a falling ADR rather than declining occupancy levels. Nonetheless, development opportunities still exist in certain micro markets, but these tend to be in secondary areas rather than in the more established areas of Dubai, it said. - TradeArabia News Service
