Increased competition is among the major concerns for suppliers in the region. Increased competition is among the major concerns for suppliers in the region.

The Hotelier Middle East Supplier Survey 2015 reveals that hotel suppliers are still grappling with issues of bribery and corruption, while increased competition and undercutting is putting pressure on rates as the market matures

Last year’s Hotelier Middle East Supplier Survey 2014 exposed a worrying trend of corruption in hotels with the majority of suppliers saying they had either been approached for, or were considering offering bribes to secure contracts.

However, this year’s survey has revealed other challenges in the industry, including increased competition and a wide-spread practice of undercutting. As always, most of the suppliers who responded to the survey are based in the UAE (62.5%), while suppliers also responded from Germany, the UK, North America, and France. The large majority of them supply to the wider Middle East, including countries such as Egypt, Jordan, and Algeria.

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Numbers Game
A majority of businesses (23.5%) said they posted net profits of US $250,000-500,000 in 2014, with 11.6% showing net profits between $1 million and $5 million. No respondents registered any losses, compared to 11.76% of respondents who said they did during 2013.

Suppliers are also generally optimistic about performance in 2015, with 91.3% expecting annual turnover to be more than 2014, and 8.7% expecting turnover to remain the same. None of the participants expected turnover to reduce in 2015.

Similarly, 82.61% of respondents expected net profits to increase in 2015, while 17.39% were more cautious in their predictions and anticipated that they would match their 2014 profits.

Some of this optimism could possibly be attributed to rising prices, with 40% of respondents saying they had increased their rates since 2014.

However, the majority (56%) have maintained costs, while 8% of suppliers had, in fact, dropped them.

Of those suppliers whose prices were increased, 80% only raised them by 0-10%, while 20% had dropped them by 11-20%. A smaller number (4%) had increased prices by 41-40%. The respondents offered various explanations for increasing their costs, including the rising valuation of raw materials, increased rates by the manufacturers themselves, as well as a shortage of supply.

From the 8% of respondents who revealed they had dropped prices, 96% had cut them by 0-10%, and a smaller 4% had slashed them by 11-20%.

Falling prices were attributed to larger sales volumes, reduced dependency on borrowing, reduction of raw material costs, and the need to be more competitive in the market.

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