hotel industry - report final final
TRANSCRIPT
Introduction
As the world is shrinking in terms of global connectivity and we are becoming more mobile,
there is a surge in demand for the hospitality services which is primarily focusing on the
expansion of Hotels business across globe and Dubai being one of the top leading hotel
industries is also going on the same line of shifts occurring globally. So our objective is to do an
assessment of the overall hotel industry set up in Dubai and to understand the shifts in Industry
trends and also to account for the key issues faced by the industry.
Dubai is the leading business class city of the seven emirates of UAE and serves as a global hub
for business pioneers in oil industry, tourism sector , real estate and as well as financial
institutions. Although Oil trading is still the largest economy driver of the city but with the
increasing international travellers, Dubai is generating heavy revenues from tourism business and
to be on the topmost tourism spots like western counterpart, it is utilizing its wealth to promote
tourism business by investing more in city’s infrastructure and facilities. It is also becoming one
of the favourite hotspots for conducting sports events. The tourism in Dubai is a flourishing and
fastest growing business and according to the figures, it is contributing twenty one percent to the
GDP.
Trend shows, that passengers footfall is increasing every year and it is estimated to reach f
million in 2012 as the passenger traffic will pick up more with the ongoing expansion of tourism
hub and now even airlines are set to have increased fleets and business travels after the recent
global downturn as a part of their business recovery process. This has also brought the exchange
of foreign earnings and led to massive employment of skilled labour in the industry to sustain the
demands.
As a tourist, attraction starts right at the Dubai duty free at airport. It offers premium class
products at reasonable prices. It covers the exclusive range of liquor, chocolates, and perfumes in
the largest selling category. Then there is Dubai shopping festival that happens in the month of
January and which attracts tourists from all over the worls. All international brands are available
at discounted prices to give the best shopping experience and it feels like the paradise for
shopaholics.
Then visitors can also enjoy watching the traditional sports events of Dubai like falconry, camel
racing, and horse racing that are famous all around. Dubai is also a place popular for its
adventure sights and camps like Desert Safari, which is worth seeing to experience the activities
such as sand dunning, quad biking and belly dancing. Then moving on to other sites, there are
beautiful sandy beaches ideal to lie down and relax. At night, one will get amazed to see the
skyline of Dubai. Burj Kalifa, the tallest tower in the city standing in a middle of malls has
become the center of attraction because of its great architectural design. Dubai is world famous
for its luxury hotels and its services and to name a few top hotels, we have Burj Al Arab,
Atlantis, Aramani, Jumeirah etc.
As tourism serves the main market for hotels and restaurant services, increase in visitors’ traffic
over the past ten years has resulted in a corresponding boom in the hotel industry. New hotels
have mushroomed in the city with a simultaneous increase in the services being offered. The
CEO of luxury hotel chain Starwood told Arabian Business that he expects to see further hotels
built in Dubai, after occupancies remained high in 2011. Even at the time of economic
downturn, there is a sustained demand for hotels. Now coming to the hotels figures, one can also
correlate this with the passenger traffic in Dubai. There are five hundred and seventy six hotels
in Dubai comprising of seventy five thousand three hundred and ninety nine rooms. This number
is expected to reach fifteen million by the year 2015.
Overview about the Dubai Hotel Industry
Hotel can be seen as a commercial residential area where a guest or a traveller can avail its
multiple offerings and services on paid basis.The services broadly include lodging
, restaurants, transportation and operations like housekeeping facilities, infrastructure utilities etc.
The industry apart from offering accommodation and food and service also offers recreational
services like theme parks, sports club etc. For example Atlantis the palm, the five star resort,
includes Aqua venture theme water park and Dolphin bay in which guests can swim and
interact with dolphins.
Characteristics of Dubai hotel industry
Some of the characteristics of Hotel industry are as follows:
Intangible: Hotels do not sell rooms, they only let the right to use to use that room for a
particular period of time or in other words they only sell the services. As services cannot be seen,
felt, touched or smelt before consumers actually purchase them, therefore the industry is
intangible in nature. Hotels should understand that the consumer satisfaction is transient and
considering the number of passenger traffic, it is imperative for hotels in Dubai to create an
impact in the minds of consumers.
Inseparable
Hotel owners and guests are inseparable since it is very rare for a transaction to take place
without both the parties present. Also, a customer would not go for a hotel if he is not happy with
the attitude of the manager or if the service is inappropriate. As Dubai has a large number of
hotels, therefore customer has a variety of options to choose from. For that matter, the behavior
of the service provider plays an important role. Moreover, inseparability also exists between
various groups of customers where one group by being noisy and clamorous can affect the
decision of other group. Therefore it becomes very crucial for hotel employees to understand the
things that might impact the consumer employee interaction.
Variability
The fluctuating demands for hotels in case of Dubai make it variable in nature. For example at
the time of Dubai Shopping Festival, the demand for hotels increases at a significantly high
level. It is this fluctuating demand that makes it difficult to provide the consistent quality of
service during the peak season when the demands are high. So the quality of the service that is
provided depends on where and when that service is provided. Since demand cannot be
controlled therefore variability is inherent in case of Dubai hotel industry.
Perish ability
The service industry’s final output is transitory and not permanent since a hotel room cannot be
stored. For example Atlantis is not able to sell a room on a particular day; it cannot store it in the
inventory and sell the following day since the revenue from the sale of that room for that
particular day is lost forever.
All of the above factors are directly linked to occupancy rate of a hotel, so it makes more
important for a hotel to understand and fulfills the customer needs and comforts.
Key products and services of Dubai hotel industry
Hotels provide a combination of core and supplementary services. Since the core services are
essential in most of the hotels, therefore management needs to excel on the supplementary
services in order to attract customers. It is pertinent for any hotelier to keep adding new services
in the product mix based on the preferences of consumers. At the same time modifications in the
existing strategies is also required.
A product mix includes good lodging services as well as other essential facilities like light,
water, electricity, sanitation, recreation and so on. Hotels should make consistent endeavors to
improve the quality of their services particularly the accommodation and housekeeping services.
Resort hotels like Madina Jumeirah and casino hotels, for example, offer a variety of activities to
keep travelers and families occupied for much of their stay.
Key product attributes in the hotel industry
The role of defining product attributes is very important as it forms the basis for measuring
quality of hotel services. In a hotel service industry, some of the key attributes on which
customer expectations lie upon are:
Hotel Image – It covers the overall market reputation of a hotel, its standing against competitors,
star rating and customer recommendation, brand recall in customers’ mind etc.
Hotel Facilities – It attributes for the facilities available in a hotel such as entertainment clubs,
pools, theme parks, hotel surroundings etc.
Rooms – Interiors, décor, cleanliness, bedding, provision of amenities, equipments and fittings,
type of suite, wi-fi connection etc. attributes to the room quality.
Price/Value – It includes room tariffs, package deals and offerings in general that provide value
add to the money spent by a customer.
Marketing – Hotel advertisements, blogs on social media, association with tour or travel
companies also create an impact in the mind of customer.
Food & Beverage – It includes range of food options available, drinks menu, world cuisines, bar
and pubs and quality of food.
Range of Services – This category is attributed by support services like, reservation
management, help desk support, room availability status, transport services and so on.
http://ro.uow.edu.au/cgi/viewcontent.cgi?article=1281&context=commpapers
Technology used in the Dubai hotel industry
Advancements in Information & Technology Sector have a great role to play in supporting hotel
services. Because of the growing competition and demands, hotels are leveraging the use of
technology at its best to be on the competitive edge to deliver quality services and maximize
guest satisfaction and comfort level. Going by the last decade, IT sector has reshaped the hotel
infrastructure with the technology oriented solutions.
Dubai Hotels are deploying latest machineries to automate their operations and reduce manual
work in order to increase the productivity and bring down inefficacies in business. There are
digital IT solutions for managing sales transaction, preparing financial reports, software’s for
inventory and supply chain management, and business intelligence software’s and data mart to
maintain databases for keeping customer records and identifying potential target pool. IT has
also helped the industry to go online over the network globally which in turn has provided
customers an easy and convenient option to go with the online reservation.
As one of high end use of technology, hotels such as Burj Al Arab have already introduced a
smart card system for their high profile guests. This card works as an ID system, which once
activated for a customer profile will identify that customer on his arrival and then automatically
direct that customer to his room.
http://consultbenefit.com/it-tools-for-your-biz/technologies-that-help-the-hospitality-industry-
cut-costs-and-increase-efficiencies
Hotel Industry Structuring
With the adaption of global business model, industry is adjusting to meet the demands of an
international market visa-vise distributing their business globally. This has led to the shift in the
organizational hierarchical structure and industry is reshaping to the rapidly changing
market.There is an increased focus on the strategic management restructuring by means of which
Dubai Hotel Industry is capitalizing on vertical strategic work partners or mergers that would
allow the business to expand at a larger scale in this maturing market.
Hotel companies are realigning themselves with the decentralized and flatter across other
demographics in contrast to have one centralized authority as used to be the thing of the past.
This is because decentralizing the forces would help to narrow down the distance and putting the
staff closer to the customer would definitely help fulfill their needs better. This change is also
facilitated by the ease of sophisticated IT and telecom channels for quick and better networking
across globe. Advantages following this line of thought are that vertical integrations can position
a company across boundaries with better services control and delivery and that too with the
common branding. This would also help to save on supply chain as having the integrated
company to a greater market presence and it becomes more accessible to different sources
http://www.hotel-online.com/Trends/Andersen/global.html
http://books.google.co.in/books?
id=W0a6PFMAxGYC&pg=PA40&lpg=PA40&dq=how+hotel+companies+are+integrating+vert
ically&source=bl&ots=4RueK_09yR&sig=bfwfW7XENI0qXsdU1h2BHEapI5A&hl=en&sa=X
&ei=KUZvT8bGF4bwrQeR8-CgDg&sqi=2&ved=0CFEQ6AEwBQ#v=onepage&q=how
%20hotel%20companies%20are%20integrating%20vertically&f=false
Key suppliers to the Dubai hotel industry
Hotel industry’s supply chain implies a complete a flow that starts with purchase of raw
materials and then finally getting transformed into a product or service that can be rendered to
end user. Dubai hotel industry’s key suppliers include the following:
Raw material supplier
These are the suppliers who deal in the supply of unfinished basic goods. Basically in
hotel industry raw material is required in construction work, architecture design, interiors
décor etc. These suppliers are mostly termed on contractual basis because of the nature of
the demand which is required in bulk.
Skilled resources & labors
These are the skilled human resources hired and trained for their jobs to perform hotel
operations.
Information technologies
IT companies supply digital technology software solutions that streamlines and automates
the hotel back office and front end operations such as sales transactions management,
financial reporting tools, analysis soft wares, telecom connections such as printers, fax
machines, Wi-Fi etc.
Food & catering
It includes supply of food items ranging from raw vegetables to the processed food,
bakery and confectionary items, drinks & beverages.
Consumers of the Industry
Based on customer needs and expectations, Dubai Hotel Industry has primarily classified its
consumer targets in the following categories.
• Solo Travelers/ Backpackers – This segment of customers, are those who prefer to travel
independently with a purpose of exploring different geographies and have interest in meeting the
local people and experience their cultures. This kind of travelling is typically seen in young
adults, who have budget constraints, less liabilities and have more time to spend in travelling
places unlike other travellers who have come in groups on recreational vacation. Here, by
Backpackers we mean that they carry luggage which are easy to be carried along while travelling
in the city. Such customers opt for low price accommodations. So to cater to their needs there are
budget hotels like Holiday Inn and Karama that offer rooms, lodge areas at very economical
tariffs in comparison to high star rated hotels like Atlantis and their business is also growing
with a good profitable margin with the increase in number of such travelers off late.
• Couples – Couples form a different segment all together since they have come on vacation to
spend some quality time with their partner or spouse. These are usually newly married couples
on their honeymoon, who will go for hotels that offer rooms with romantic décor and a cozy
environment to best suit their mood. So for those couples, Hotels sell off different packages
branded as honeymoon packages deals at special discounts which include premium room
services, luxury rooms, access to hotel other entertainment sites, city tours etc. These people
generally prefer to stay in luxury hotels like Armani’s.
• Families –Families ideally prefer less expensive hotels like Al Barsha and buy affordable
packages that offer additional sharing basis for their kids, inclusion of special services for kids,
like play area, entry to amusement parks etc.
• Business Travelers – Business travellers are considered to be major consumer of the industry
because of their frequent travelling on business visits. They occupy rooms and conference halls
for their business meetings and for such priorities, they tend to get more quality conscious and
are even ready to pay more for better room conditions that are fitted with technology services
like Wi-Fi, printers, and fax machines, Laptops / Desktops & other business related equipment’s
in order to work comfortably.
http://smallbusiness.chron.com/consumer-segments-hotel-industry-13764.html
Following is the country wise analysis of the occupants in the Dubai Hotel Industry:
Key intermediaries in Dubai hotel Industry
The distribution link of product or services can be directed straight away from the production of
a good to the end user or it can go through different intermediate channels to reach its customers.
In the context of Hotel industry, travelers can either directly contact the hotel department or go
through the intermediate process. The direct contact can be made through hotel websites, caller
service, and reception desk for reservations whereas indirect process links to travel agent or tour
operators, who are acting as intermediaries in this process.
The tours and travel companies have tie ups with hotels at good rates and in return hotels get
promotion and larger access to reach customers. These travel companies also work closely with
the airlines or other travel firms and they have specialized in acquiring domain knowledge. So
there is a reason for a customer to see a value addition in approaching these intermediaries as
they provide a complete tour package that combines accommodation, visa process, air transfers,
sightseeing etc. at lower prices.
http://www.hotelmule.com/management/html/14/n-2114.html
http://books.google.ae/books?
id=FQGBwm3uMU0C&pg=PA80&lpg=PA80&dq=buying+process+in+hotel+industry&source
=bl&ots=llUAmmNNBD&sig=PwA1nZKXBxp0hkzQs9kZcRXudDQ&hl=en&sa=X&ei=eE14
T9qRAcnWiALA4OiiDw&ved=0CHoQ6AEwCQ#v=onepage&q=buying%20process%20in
%20hotel%20industry&f=false
Consumer’s needs and expectations from hotels
Here the primary need of a customer is the quality of services rendered by a hotel unit. A
customer would look for the hotel brand name and its reputation in the market, quality of hotel
site, condition of rooms, hotel staff, and amenities provided. Other than that warm welcome upon
arrival, pleasant atmosphere and friendly decorum of hotel staff also generate positive vibes in a
guest’s mind.
Hotels should have a good communicating system for sharing information with clients. They
should have information help desk available through the day for the customer concerns and
maintain good interaction. Hotel staff should pay special attention to customer’s room
cleanliness, room interiors, bedding, digital/ technical equipment fittings etc. along with the
provision of other basic amenities. Housekeeping services should be responsive in checking up
customer concerns.
Hotel management should understand and address the situation that a customer has not only
come here for staying but to collect the delightful memories of his experiences, so to win a
customer’s loyalty and maintain a relation, hotel whole staff should make a concentrated effort to
satisfy customer needs with the quality of services and provide a worth to his package as client
perceives quality directly with the money.
http://www.dgt.uns.ac.rs/turizam/arhiva/vol1_2.pdf /
Major Competitors in Dubai hotel industry
Dubai’s high tourism rate has brought this industry into a very competitive shape and the
business is expanding at a fast pace. If we talk about Dubai’s top market players in this context,
then here are some branded establishments that are competing against each other in the category
of most luxurious hotels.
Grosvenor House Hotel Dubai
Atlantis Palm Jumeirah
Burj Al Arab
Armani Hotel
Madina Jumeirah
These hotels have set up a trend in the industry with its world’s finest class infrastructure and
facilities that surpass anybody’s expectations and imagination
Grosvenor House Hotel Dubai:
This has won accolades for the best hotel for consecutive years in 2010 and 2011 for the kind of
prominent landscape in the middle of the city business centre. Without any doubt it takes the top
position with tits commendable services and level of quality one can expect. It satisfies the needs
of business travelers with its ultra tech modern facilities and of families with its leisure
entertainment sites. There are two Grosvenor towers that are similar looking; one is Grosvenor
House West Marina Beach and other one is newly constructed Grosvenor House, The Residence.
Both of them are of same height and consist of forty eight floors that lay down more than seven
hundred suites. It is a brand name in the industry because of its ultra-modern structure with
Arabic touch and has major attraction sites as emirates towers.
Atlantis Palm Jumeirah:
This is one of the novel high standards of construction on Palm Beach side and takes the lead in
the league. Located in a prime area of Jumeirah Palm Beach side, it has extra ordinary services to
offer leisure and comfort in its built of approximately 1,400 rooms and 166 luxury suites. This
also covers a portion of beaches in its private residency where guest can relax and experience the
scenic beauty of it. It has a unit of water world by the name of Atlantis Water Park that has
become the center of attraction for outside visitors and hotel guests for its thrilling water rides,
water rafts and a lovely dolphin amusement park that organizes dolphin shows, a swim with
dolphin and lot more.
Burj Al Arab: It is acclaimed as seven star hotel in its true sense because of its unbelievable
lavishing services apart from its unique and stylish infrastructure design that is in a shape of a
sail. It is supposedly the fourth tallest tower with twenty eight floors comprising of more than
two hundred suites for accommodation with a tariff per night is in the range of approximately
$1,000 to $27,000. It houses world’s best services in terms of entertainment, recreational
facilities, dining experience that one could get at maximum comfort. This hotel also offers a
place for high class business conferences and meetings in latest technological environment
support.
Armani Hotel:
Armani hotel was designed and developed by Giorgio Armani and it reflects the pure
magnificence and sophisticated comfort of armani’s style. It is nested in the world’s tallest
skyscraper Burj Khalifa and it offers sweeping glance of the city. It provides its guests an
atmosphere of calm tranquility where guests can retreat into a world of elegance. Armani hotel
features eight restaurants with a variety of available food options. It also offers extensive Armani
spa that includes personal treatments and sequential thermal bathing.
Hotel Armani gives access to Burk Khalifa’s observation deck and offers impressive view of
Dubai Fountain show. Also it is easily accessible within walking distance to one of the world’s
largest mall-Dubai Mall
Madina Jumeirah:
It is one of the most fascinating resorts in the world owned by Jumeirah group of hotels. It is
designed to resemble a traditional Arabian town and is one of the largest resorts in Dubai. In
midst of beaches, this hotel is the top choice for the famous celebrities. Booking a room here is
the biggest challenge especially for a non-famous personality as it seems to be booked round the
year by top celebrities. The resort comprises of forty world class restaurants. It offers music and
entertainment from all style and moods. It is located along the beachfront adjacent to Burj Al
Arab and Wild Wadi water park and gives complementary access to the water park.
https://www.google.ae/#hl=en&output=search&sclient=psy-
ab&q=These+are+some+of+the+best+known+hotels+that+not+only+provide+the+best+luxury+
accommodation+but+also+feature+world%E2%80%99s+best+services+and+facilities.
+These+hotels+take+you+into+a+dazzling+world+of+imagination+and+the+kind+of+architectu
re+they+have+used+is+really+impressive.&oq=&aq=&aqi=&aql=&gs_l=&pbx=1&bav=on.2,or
.r_gc.r_pw.r_qf.,cf.osb&fp=3251d92969fd66e4&biw=1280&bih=524
http://www.grapeshisha.com/where-to-stay/hotels-in-dubai.html
Successful or Unsuccessful times for Dubai Hotels:
With the increasing competition and market fluctuations, hotel industry is facing a tough phase
in terms of pricing. After the global slowdown of liquidity in cash, rates have been cut down to
meet the cutting edge competitive demands. High brands are taking more hit than budget hotels
in terms of revenues. Economy hotels, budget accommodations have sustained through the
slowdown period whereas five star hotels have noticed a greater dip in profits because of their
high costs.
For example- Holiday Inn express near Dubai airport, is an affordable accommodation with a
descent level of service. According to figures, though rates were gone down but still this hotel
registered an increase of ten percent in occupancy rate during 2011 when other high end hotels
like Emaar groups suffered heavy losses and on the similar lines some companies cancelled their
new projects.
http://www.hotelnewsnow.com/Articles.aspx/2361/Dubai-Worlds-default-could-hinder-
industrys-recovery
http://www.khaleejtimes.com/DisplayArticle.asp?xfile=data/business/2010/March/
business_March9.xml§ion=business&col=
Product Differentiation initiatives by Dubai hotels:
In a highly competitive industry like Dubai where everybody is facing stiff neck to neck
competition, it has become imperative for the hoteliers to provide distinct flavor of the services
to the customers to win their loyalty and exceed the growing expectations. Therefore, product
differentiation is on priority for all the hotels segments mindsets.
High end hotels like Armani and Grosvenor differentiate from other competing brands by
offering wide range range of luxury services. Similarly, budget hotels should be doing to mark
distinction in their limited range of services. In this context, there should be a clear and unique
branding of hotel’s features which can connect customer’s mind strongly and there is no
confusion for a customer to understand before making a decision.
Hotels as a first step of brand marketing should identify their target customer pool and where do
they want to start from. With that keeping in mind, they should lay down their services aspect to
their target consumers. For a high class hotel like Burj Al Arab, branding comes with a style, so
they can provide extended leisure facilities along with the stay and delight the customers with the
comfort for which they have come for. To swipe a greater market share, pricing is very decisive
for a deeper market branding. If a customer is paying for a service then it should have that worth
and provide maximum value addition to a customer.
Then location is also a key to reach out to the larger customers. A prime location near city’s
business centre, or near airport or in the middle of city’s core proves to be on advantageous
position as it becomes convenient living and commuting throughout the city for the travelers.
For example Emirates tower is located in the heart of Dubai. Another important aspect for the
concrete branding of a hotel is to establish an interactive relationship with the customer by
delivering the hopes and promises they have committed. They can do it with providing additional
packages that sort of motivates the clients to come back again.
http://www.differentiateyourbusiness.co.uk/how-to-differentiate-a-small-hotel-or-bb
Market segmentation in Dubai hotel industry
A market consists of wide variety of potential targets that differ from each other in terms of
needs or behavior. So to study and identify the customer trends, we use market segmentation
technique that divides the large pool of heterogeneous customers into groups of potential target
customers which show similar needs and behavior and segmenting the customers’ results into
homogenous groups which are now relatively easy to study and compare within different groups.
It takes into account the following customer segments-.
Geography based– This means customers are clubbed based on similar geographical conditions
for example region, state/city, district and zip code.
Demographic based: Here, grouping is based on customer demographics information that is
gender, age, marital status, income, education qualification and profession.
Psychographic based: It includes groups that have similar social interests, hobbies, activities,
lifestyle, and personality.
Behavioral based: In this segment customers are classified on the basis of their product usage,
for example- frequent usage, occasional usage, loyalty to a brand, buying capacity and so on.
Given the large pool of customers, segmentation on the basis of above criteria enables Dubai
hotels to cater to the needs of a specific segment in a better way. It helps hotels to stand out
among the competition and create a specific market to target the customers. For example luxury
hotels like Atlantis and Burj Al Arab follow Demographics segmentation in major and classify
its customer’s base on the basis of their income and education so as to cater to the needs of the
high end segment.
Similarly, budget hotels like Karama apart from focusing on the low end segment classify its
customers on the basis of their behavior, loyalty and number of visits. Therefore, management
should analyze the different groups of potential customers and compare within different
segments to identify the gaps and then take proper measures to bridge the gaps
Changing demographics, social and cultural trends
These factors are variably linked to the hotel market from the outside environment. Hotel
industry analysts should consider these factors with the shifting trends of global economy,
Political movements, and technology up gradations that impact to the different customer
segments within the industry based on their demographics, social class, cultural & behavioral
characteristics.
Movements such as hike in crude oil barrels, privatization of airline industry, technological
reforms in IT have direct implications on a hotel business. For example the recent protests in
Middle East countries like Egypt, Libya and Bahrain had a positive impact on the Dubai hotel
industry since the violence in these countries hurt their tourism industry and people started
cancelling their trips to these countries. But this unrest did not spread to places like Dubai who
rather witnessed an increased in passenger traffic during this period. The tourism traffic moved
towards Dubai since Dubai is strategically located and well connected to the world. This increase
in traffic can clearly be correlated with the unrest in other countries.
Key Issues faced by the Dubai hotel industry:
Reduced foreign travelling:
Initially, because of the economic boom all over the world, the foreigners were flocking to Dubai
on and off but with the financial crisis hitting the entire western world, hotels are now been
deprived of that major share of clients from abroad especially from the western countries.
Pegging of AED against dollar:
Dubai currency has been pegging against dollar. As Europeans are facing significant pressure
due to the economic downturn, it has reduced the values of euro and pound sterling against the
US dollar. It has also reduced the purchasing power of the foreigners coming into Dubai from
Europe. Europeans are the maximum revenue generating segment for Dubai hotels but the
pegging effect has reduced that share.
Sustainability Issue:
The hospitality industry is growing at a rapid rate and is expected to grow even more due to
demand driven by tourism and this poses a challenge to hotel industries to pay attention to
sustainability issues. As costs rise and demand becomes sensitive to environmental and social
performance, sustainability becomes a critical issue. Hotels have to realize their responsibility
towards improving the outlook for the future while satisfying the increased demand and still
remaining attractive to investors.
Demand vs. supply mismatch:
Given the level of demand, there is definitely a large supply of hotel rooms in Dubai hotel
industry. Though the demand for hotels is picking up at a rapid rate, however the rate at which
this demand is picking up and the rate at which hotels are supplied to the industry does not
correlate. The number of hotels added to the industry every year is way above the demand levels
and which is why the occupancy rates are low.
Cost factor:
The average room rate in hotels is approximately three hundred U.S. dollars as per the report by
STR Gobal which is quite high. In fact Dubai has been ranked highest worldwide in terms of
average room rate. Even at the time of financial crisis, these rates tend to remain the same. This
has gradually eroded the revenues received by hotels since there are many other destinations for
the tourists in other parts of the world, which are comparatively much cheaper than Dubai.
Dubai sun
Dubai is located close to equator and is surrounded by sand and humidity. With Arabian Gulf on
one side and mountains on the other, it is difficult to escape the brutal heat. Dubai is mostly dead
during summer and residents purposely schedule travels during this period of time. Due to this
reason, occupancy rates are at its lowest during this period of time.
International Competition:
Globalization touches all aspects of hotel industry and hotels in Dubai are experiencing increased
international competition. Increasingly, all the resources including customers, employees,
services, products and sources of capital are competed for across the national boundaries.
Property slump:
Slump in the real estate also poses a great challenge to the hotel industry in general since a lot of
business in the hotel industry is driven by real estate and at the time of financial crisis it snatched
all the glitter out of hotels in Dubai.
Project financing
Project financing also poses a great challenge to the industry. Raising loans for new projects through
traditional sources of revenue have become difficult. Due to the high risk involved in the hotel
investment, banks have adopted strict lending standards while issuing loans. For example interest rates for
loans have been increased recently. All this create a challenge for the Dubai hotel industry.
http://www.hotelsdubaiblog.com/dubai-hotels-the-challenges-ahead/
http://www.arabianbusiness.com/property-slump-biggest-challenge-for-dubai-hotels-9493.html