Dubai hotels hit as Russians seek cheaper options

Hotels in Dubai reported weakening performance trends, as revenue per available room (RevPAR) declined by 6.6% to US $340.06 in November, according to new HotStats data.

The contraction in room revenues was due partly to a softening of occupancy which fell by 1.1 percentage points to 86.7% but led largely by a decline in average room rates (ARR) of 5.5% to $392.37, the survey compiled by TRI Consulting said.

It said the drop in room revenues also caused a decline in total revenues per available room (TRevPAR) by 2.3% to $602.70, but was compensated in some part by an increase in food and beverage revenues which rose by 4.8% for the month.

Profitability levels were under pressure as some key cost items such as payroll and sales and marketing inched higher for the period, causing gross operating profit per available room (GOPPAR) to contract by 4.3% to $316.36.

Peter Goddard, managing director of TRI Consulting, said: "Hotels in Dubai have begun experiencing several demand and supply based issues that have weighed down on performance levels for the period.

"The largest impact was seen through the deterioration of political and economic conditions in Russia and some eastern European countries that drive significant demand to the city.

"The declining Rouble and higher rates in Dubai appears to have made many of them reconsider their trip to Dubai, but also diverted some traffic to Sharm El Sheikh and Istanbul which offer a better value proposition. Additionally, new supply entering the market has also made the sector more competitive," he added.

Last month it was reported that the number of bookings from Russian travellers to Dubai was down by more than 50% in the last two months because of the falling rouble and oil revenues, according to Igor Egorov, the chairman of the Russian Business Council in Dubai.

Similarly, growth in passenger traffic through Dubai International Airport slowed in November because of the geopolitical and economic instability hitting Russia, the airport's operator said last week.

Dubai is a popular tourist destination for Russians and a convenient place for them to park some of their savings abroad. Western economic sanctions against Moscow since the pro-Russian uprising in Ukraine, and the slide of the Russian rouble, appear to have reduced Russian visitors in recent months.

Passenger traffic related to Russia and other countries in the Commonwealth of Independent States plunged 18.2% from a year earlier in November, Dubai Airports said.