High air fares, extra rooms affect occupancy levels
Steep air fares brought on by recent high oil prices coupled with increased room capacity saw hotels in the UAE's picturesque east coast emirate of Fujairah falling back on domestic tourist traffic to record an average performance this summer.
Patrick Antaki, general manager of Le Meridien Al Aqah Beach Resort, told The Business Weekly that the number of foreign tourists brought in by tour operators had declined by 10 to 15 per cent during the summer season.
"Demand has been lesser than last year due to expensive flights from Europe to the Middle East, where on an average fares went up to Dh3,000 from last summer's price of Dh1,800."
The availability of extra rooms that have come into the market during 2007 has also affected occupancy levels. Three new starred resorts along the Dibba-Al Aqah coast and a starred hotel and hotel apartments property opened in Fujairah town during 2007. In 2006, Fujairah had a total of eight hotels with average occupancy of 69 per cent. The number has doubled this year and at least another four projects are on the anvil.
The fall in foreign tourist arrivals follows a period during which major beach-fronted hotels have spent millions to refurbish properties struck by cyclone Gonu that hit the UAE's eastern shores last June. Six resort properties suffered losses to the extent of Dh12 million from the cyclone.
Despite these conditions, LMAA averaged an occupancy rate of 80 per cent this summer as compared to the 95 per cent plus levels it was accustomed to seeing a couple of years earlier.
Antaki said this was because of the resort's strong exposure and reputation that brought in repeat customers and helped the five-year old property, which is credited with developing the Al Aqah destination, pull through the summer. "We have replaced the reduction in foreign tourists with guests from the UAE."
GCC visitors
At the neighbouring five-star Fujairah Rotana Resort & Spa which draws 80 per cent of its business from the leisure segment, the local market contributed 45 per cent of the hotel's occupancy during the summer.
"Our main clients are UAE expatriate residents and visitors from the GCC states. We also attract German, British and Russian tourists but Fujairah remains a destination that's mainly driven by domestic demand," said Jean Francois Laurent, general manager of Fujairah Rotana Resort & Spa.
Al Diar Siji Hotel (ADSH) also draws largely on domestic traffic. During 2007, domestic visitors accounted for 45 per cent of the hotel's guests. The rest came in from the Middle East, the US and Europe. Basically catering to business travellers and corporate clients, ADSH notched up 20 per cent growth in revenue and 10 per cent increase in arrivals during the year as compared to the previous year. "We're optimistic that the growth trend will spill into 2009," Fouad Melhem, general manager of Al Diar Siji Hotel, said.
Operating margins
"There is growth in the industry but with costs of most supplies going up, operating margins will be affected. We can no longer expect 20 per cent growth levels seen earlier but business is stabilising," Antaki pointed out. He expects a 12 per cent increase in revenues during 2008 as compared to last year.
"New resorts are still fighting for their share of the market. Niche markets have to be developed. This may not be a boom time but occupancies are developing, businesses are moving in the right direction," Antaki observed.
Melhem too is optimistic that the surge in supply of rooms generated by the entry of new four- and five-starred properties would enhance Fujairah's image as a holiday and business destination in its own right and not just an add-on in the itineraries of tourists flocking to Dubai.
"We are targeting the meetings, incentives, conferences and events segment to promote Fujairah as an alternative venue for banqueting and conferencing events," he said.
Underscoring this confidence, the hotel's management plans to launch the five-star Siji Hotel Apartments by this year end. At LMAA, $2 million has been spent in redoing the beach structure and the renovated poolside restaurant Baywatch, due to open early next year. On its part, the Fujairah Rotana saw the opening of Zen, its modern spa in August. It plans to upgrade room facilities and add a food and beverage outlet to its existing six next year.
By Armenia Fernandes
© The Business Weekly 2008
