Abu Dhabi hotels urged to get creative to compete

Managers of Abu Dhabi hotels will need to get "creative" this year if they want to stop room rates falling when a flurry of new supply hits the market, according to the director general of Abu Dhabi Tourism Authority (ADTA) speaking at Wednesday's Great GM Debate.

Hoteliers in the UAE capital will come under huge pressure in the last quarter of 2011, when at least 3000 additional hotel rooms and a surge of new luxury brands are expected to come online, Mubarak Al Muhairi said.

Among the biggest hotel names which will arrive in the city are Jumeirah, St Regis, the Ritz Carlton, Hyatt, the Westin, Sofitel and the Anantara, all of which will open their unique destinations between October and January.

“Many of the hotels are coming online in one quarter. That will definitely create pressure in the short term,” he asserted.

“Hotels need to come up with creative and active sales and marketing plans, and they will have to work with the tourism authority, because there will be pressure.

“I don’t know [if the rates will fall], but definitely the hotels will try to hold.”

Prices for Abu Dhabi hotels have fallen significantly in the first six months of the year, dropping 15% compared with the same period in 2010, according to a survey by international corporate services firm Hogg Robinson Group.

Two years ago, Abu Dhabi was ranked the second most expensive city in the world for hotel rooms after Moscow.

Experts say the decline in rates is due to a sharp rise in the number of hotel properties on the market.

In April, a report by property consultancy Jones Lang LaSalle (JLL) said a sizeable supply pipeline could reduce hotel occupancy rates in the capital through 2011 and 2012, but that the sector is still forecast for growth.

Al Muhairi said a fall in rates had been effective in drawing visitors to Abu Dhabi.

He added that a surge in new hotel rooms was vital if the emirate was to be considered a competitive tourist destination.

“This is the cycle. Demand and supply never match,” he said. “It [the oversupply] is a short-term problem. In the long term it will increase the capacity of the city, and businesses will grow because of this. It [Abu Dhabi] is still a small destination. Without an increase in capacity, you cannot grow.”

Tourism, which accounts for 10% of non-oil GDP in Abu Dhabi and 3.2% overall, is a key focus for the government as it seeks to diversify the economy away from oil revenues.

Part of the 2030 plan, industry growth is expected to be stimulated by a flood of new cultural sites, tourist attractions and island developments.

By the end of the year, ADTA hopes to receive 2 million hotel guests to the emirate, compared with just 1.81 million last year.

In the first seven months of 2011, Abu Dhabi has seen double digit growth in hotel occupancy, spurred by the regional unrest which deterred visitors from more traditional tourist hubs Egypt and Tunisia and pushed them towards the ‘safe havens’.

Al Muhairi said the increase in flow was likely to subside in the coming months, but the emirate remained on track to achieve its target.