Market Report Middle East

In July Dubai Hotels Barely Break Even As Occupancy Levels Plummet to 50.3 Percent

MENA Chain Hotels Market Review - July 2014

HotStats The Dubai hotel market saw occupancy levels fall to 50.3 percent in July as overall demand within the city reduced due the summer heat and impact of Ramadan, according to the latest HotStats survey of full service four and five star hotels by TRI Consulting.

Occupancy in Dubai hotels was down 4.6 percentage points compared to the same period last year but hoteliers were able to achieve a 1.1 percent increase in average room rates (ARR) to US$202.94. As a result, revenue per available room (RevPAR) levels fell by 7.4 percent. With food and beverage revenues also declining, gross operating profit per available room (GOPPAR) plummeted by 99.5 percent to US$0.07, resulting in hotels barely covering operational expenses.

“Dubai hotels were impacted from the collective effect of the annual summer slowdown and the occurrence of the holy month of Ramadan throughout the entire month of July, resulting in occupancy levels falling to 50.3 percent. This had a trickledown effect on the profitability of hotels especially with significantly lower food and beverage revenues during the month. Hotels only marginally broke even as high fixed operating costs resulted in GOPPAR dropping to US$0.07. Although performance was down in July, the overall market remains strong with year to date occupancy levels averaging 79.4 percent and profit margins at 46.4 percent” commented Peter Goddard, Managing Director of TRI Consulting in Dubai.

Banqueting demand helps boost Riyadh hotel profits

The Riyadh hotel market experienced mixed results during the month of July with a reduction in rate and occupancy impacting RevPAR levels, however food and beverage and banqueting demand boosted total revenue per available room (TRevPAR) by 7.2 percent. RevPAR performance was down 8.3 percent during the month driven by a 7.6 percent drop in ARR to US$214.91 and a 0.3 percentage point fall in occupancy to 38.3 percent. An increase in food and beverage and banquet revenues of 25.0 and 63.3 percent respectively, drove top-line revenue growth and when coupled with consistent operating expenses saw GOPPAR rise 10.8 percent to US$53.25.

“Although Riyadh hotels saw overall room revenue fall during July, a significant increase in banquet revenues driven by Iftar events, helped hotels record a 7.2 percent growth in top-line revenues. The holy month of Ramadan historically results in substantially lower levels of demand and July was no exception with the overall market achieving an average occupancy of 38.3 percent. Even though the hotel market was depressed during the month, year-to-date performance remains strong with occupancy levels up 6.6 percentage points to 63.8 percent” commented Goddard.

Rates in Abu Dhabi continue rebound as demand strengthens

Average room rates in Abu Dhabi increased by 5.1 percent in July to US$114.10, driven by a 4.5 percent growth in RevPAR to US$57.36.

Table - MENA Chain Hotels Market Review - July 2014

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