LONDON – Recent data from STR Global shows the differing effects of the economic slowdown on two major destinations in the United Arab Emirates, with some dramatic effects in January 2009 as the crisis deepens. The region has experienced unprecedented buoyancy over recent years as the supply of hotel rooms has been insufficient to meet demand. This means the market is falling from a fairly high base, which somewhat cushions the blow even if this is of little comfort to operators and owners.
The success story of Dubai has gone into reverse. Year-on-year changes in revenue per available room slowed dramatically in the second half of 2008 as the graph below illustrates. On the other hand, Abu Dhabi is a destination slightly behind the development cycle than Dubai and consequently experiencing less of a supply issue. It is weathering the storm somewhat better as can be seen by the increases in revPAR.
Abu Dhabi and Dubai quarterly 2008 revPAR percentage change year on year
Source: STR Global
Results for January 2009 show a similar if somewhat worse picture-particularly for Dubai, where on certain days the fall in revPAR year on year is more than 40 percent. Dubai’s decline in January’s revPAR is largely shared between drops in both occupancy and average daily rate.
“What we are seeing is the classic knee-jerk reaction to a fall in occupancy with waves of panic pricing. The last thing revenue managers want to do is to suffer twice. Both from the fall in occupancy and then in rate”, explained James Chappell, Managing Director of STR Global. “The effect of bringing the Dubai Shopping Festival forward by 10 days in 2009 has been of limited effect.”
Part of the volatility for the year-on-year change in January’s revPAR in Abu Dhabi came from the staging of the PGA European Tour Abu Dhabi Golf Championship from 15 to 18 January 2009 compared with 17 to 20 January 2008. The increase in January’s revPAR is due to the increase in average daily rate outweighing the decline in occupancy over the month.
Abu Dhabi and Dubai daily revPAR % change day on day
Source: STR Global – daily sample
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For more than 20 years, Smith Travel Research has been the recognized leader for lodging industry benchmarking and research. Smith Travel Research and STR Global offer monthly, weekly, and daily STAR benchmarking reports to more than 36,000 hotel clients, representing nearly 5 million rooms worldwide. STR is headquartered in Hendersonville, Tennessee, and STR Global is based in London. For more information, visit www.strglobal.com.
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