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Healthy competition in the northern Emirates


Nikhil Pereira, February 9th, 2016

The Northern Emirates’ tourism and hospitality sector has grown in the last few years. Sharjah and Ras Al Khaimah have both carved a niche for themselves, with Ajman, Fujairah and Umm Al Quwain also stepping up their marketing efforts.Over the last decade, international hotel operators have set up shop in the UAE’s northern region, and believe prospects are high in these emirates.

Sharjah’s hospitality market is expected to rebound slightly in 2016. While Sharjah’s number of hotel and hotel apartment guests fell last year, according to the Sharjah Commerce and Tourism Development Authority (SCTDA), its chairman Khalid Jasim Al Midfa expects the number of guests to grow by 3-5% in the current year from 1.79 million in 2015.

Sharjah announced its tourism vision last year to nearly double the number of tourists in the next five years from 5.6 million in 2014 to 10 million by 2021. Unlike nearby emirates Dubai and Abu Dhabi, which have focused on mega projects to attract tourists, Sharjah is relying on its charm as the cultural capital of the UAE to increase its share of visitors.

Tourism boards in Ras Al Khaimah and Ajman have also set goals for their emirates. RAK tourism authorities highlighted their mission to attract one million visitors. “Ras Al Khaimah witnessed great success in 2015 and we will continue to learn and build on our successes of last year,” says RAK Tourism Development Authority (RAK TDA), CEO, Haitham Mattar.

The emirate recorded 12,709 visitors alone over the three-day Eid-Al-Adha break in 2015, with its 5,000-odd rooms at 93% occupancy. Top feeder markets included tourists from the UK (12%), Germany (8%), India (6%), and Egypt (4%). Visitor numbers to Ras Al Khaimah hit 740,383 in 2015 representing a 5.7% increase year on year, according to Mattar.

Hotelier Middle East has previously reported that the emirate saw 835,200 visitors in 2011, 1.1 million in 2012, 1.24 million in 2013, and 730,000 in 2014.

When questioned, Mattar says: “While we saw a decrease in visitor figures in 2014, we achieved a 43.6% increase in total hotel revenue in 2014, compared to 2013. This suggests that although visitor figures were lower, those who did visit, either chose more luxurious breaks, or increased their length of stay in the emirate — one of our key objectives for international visitors.

“Additionally, 2014 was a challenging year for one of our key source markets, Russia, as they faced a weakened currency with the rouble hitting an all time low against the US dollar. This ultimately affected travel from Russia to many destinations including Ras Al Khaimah which impacted the overall visitor figures.”

Meanwhile, The Ajman Tourism Development Department (ATDD) assumed an aggressive stance in the last 12 months. ATDD signed a partnership with Ajman Department of Economic Development (Ajman DED) to develop and implement effective practices to help boost the economy of the emirate. The emirate also hopes to reach five million tourists annually by 2021. Q2 2015 was one of the emirate’s strongest in recent times as it reported that 3,420 rooms and units were occupied, an increase of 14.5% as compared to the same period last year.

Ajman Tourism Development Department general manager Faisal Al Nuaimi says: “Tourism in Ajman is growing. There might be a slight decrease in the number of guests to the emirate in 2015 as a result of a number of factors that have affected the industry as a whole, but the increase in the number of stays (guest nights) indicates that we offer products and services that visitors do not find in the other emirates.”

Al Nuaimi adds: “This doesn’t mean that we are competing with our neighbouring emirates but we complement, and support, each other by offering visitors other forms of activities or attractions. These include our beaches, our warm Arabian hospitality and the peaceful environment.”

Colliers International reports that the Northern Emirates are improving performance. Colliers International MENA director and head of hotels Filippo Sona says: “For the period ending December 2015, the Northern Emirates appear to have achieved a market hotel performance similar to other emirates.

“With the exception of Sharjah, hotels in the Northern Emirates have witnessed rising occupancies year on year, with Ajman registering the highest occupancy at 75% and Ras Al Khaimah maintaining its leadership position with regards to ADR.”

“Of all the Northern Emirates, Umm Al Quwain has the most consistent market performance, with average room rates and occupancy close to AED 414 and 68% respectively for the past three years,” he says.

However, Ajman showed classic signs of a small market when FRHI opened there. “Ajman rates saw a slight rate drop due to the new Fairmont hotel opening, which entered the market [in May 2015] with promotional rates to gain market share, which in turn compressed the market,” Sona adds.

He continues: “Decrease in Russian guests (due to fluctuating rouble) has strongly impacted Ajman and Fujairah. Whereas RAK witnessed a strong increase in performance from various other source markets such as the Gulf countries, India, China and Europe.”

12 months in review

Hotels in the Northern Emirates were affected like others in the wake of the Russian and European economic downturn, but managed to stage a counter-offensive to ward off losses. It resulted in several hotels registering positive results.

Ajman Palace Hotel general manager Ferghal Purcell says: “2015 was no doubt a challenging year, but at the same time it was equally productive.” He confidently tells Hotelier that the Ajman Palace Hotel outdid its competitors on RevPAR, ADR and occupancy.

The Fairmont Ajman opened midway through 2015, and its general manager Henry Schaeffer says: “As we opened in May 2015, it was difficult to know what to expect from the Northern Emirates, particularly going into the summer season. We are, however, happy to say that the property was well received and we are very pleased with our opening success.”

Kempinski Ajman GM Kai Schukowski reports challenges: “2015 has been a very volatile year with the challenging political situation in Russia and Ukraine as well as the devaluation of the euro versus the US dollar, affecting our main feeder markets from Western and Eastern Europe.”

“Nevertheless, in order to maintain the market share, where in fact we grew compared to the previous year, we had to drop our rates to stay competitive. This affected the overall RevPAR adversely, yet the increased occupancy ensured great performance throughout our 11 F&B outlets, which contributed more than 60% to total hotel revenue,” he adds.

And although Fujairah-based Le Méridien Al Aqah Beach Resort faced similar challenges, the resort managed to surpass its own targets by 2%. “Our occupancy levels have been healthy year-on-year despite the challenges in 2015. The RevPAR performance was slightly affected, however we have managed to retain the top spot on our destination competitor set,” reveals Patrick Antaki, complex general manager, Le Méridien Al Aqah Beach Resort, Fujairah and Al Maha, a Luxury Collection Desert Resort & Spa.

Look to the future

Hotel developer Resources for Leisure Assets (RLA) reports that the prospects for Northern Emirates are massive, and the firm is working on a few projects that exemplifies that belief. “Without doubt the Northern Emirates can be the unspoilt leisure destination without the hustle and bustle of Dubai and Abu Dhabi. Hotel developments are feeding off the notion of the ‘emirates being leisure orientated’ and therefore we are seeing a lot of focus on properties being designed as the perfect escape for families and the luxury escape from Dubai,” says Roger Allen, CEO of the development firm.

“It’s fair to say that the Northern Emirates’ hospitality development has gained tremendously from government investment in tourism, whilst this has been supported by significant improvements in the localised infrastructure such as residential, entertainment, shopping malls and mixed-use development,” adds Allen.

The pipeline for the Northern Emirates is growing. RAK TDA’s Mattar adds: “Ras Al Khaimah has strategically planned the expansion of the hospitality sector in preparation for the increasing number of tourists. These plans include an extension to the Cove Rotana Resort by 147 rooms, and to the DoubleTree by Hilton Hotel Resort and Spa Marjan Island by 240 rooms. We also have plans to launch hotels such as the Santorini Hotel by Bin Majid with 410 rooms, Golden Tulip with 104 rooms and Citymax Hotel with 204 rooms.”

Sona shares further details: “2015 also saw the opening of 1,139 keys, with Sheraton Sharjah (349 keys) Fairmont Ajman (254 keys) and Millennium Fujairah (221 keys) as the biggest properties opened.

“The future supply of the Northern Emirates appears to be healthy with more than 5,509 keys in the pipeline to 2019 with Ras Al Khaimah and Sharjah leading the new pipeline with 43% and 25% respectively of the total new supply.”

He adds: “Ajman is expected to accommodate an extra 807 keys by end of 2017, early 2018, potentially diluting demand further, as new hotels will provide promotional rates to attract business and gain market share. The future for the Northern Emirates is likely to see higher occupancies as hotels will feel the pressure and will attempt to reduce rates to maintain a consistent level of demand.”

R Hotels, the owning company of both Ramada Hotel & Suites Ajman and Ramada Beach Hotel Ajman, recently announced the construction of a 182-key property in Ajman Corniche, also confirming the increasing demand of hotel rooms in the emirate.

And it’s not just the number of keys that are looking to increase. Source markets are being viewed even more strategically in order to counteract the Russian decline.

The SCTDA is looking to attract more tourists from the GCC countries and growing tourism source markets such as China, India and Europe through promotional campaigns. It also plans to open five overseas offices in China, India, Russia, Germany and Saudi Arabia in the current quarter.

When it comes to Ajman, Al Nuaimi says while the emirate has traditionally relied on GCC tourists, it has singled out India as its target market. “India is one of the key potential international markets that Ajman will look to tap into in 2016. With over 30% Indians that make the UAE’s population, there is a large number of VFR (visiting friends and relatives) travellers that visit the UAE. Ajman in particular can target middle-income travellers from two-tier cities who would seek value for money accommodations and attractions.”

Ras Al Khaimah plans to attract 820,000 tourists this year, increasing to 900,000 in 2017. The RAK TDA is also confident it will hit the one million target that it set out to achieve by 2018.

In conclusion, 2016 will see the Northern Emirates add to its keys and further diversify its source markets in an effort to stand out as viable tourism destinations as an accessible option in comparison to the behemoths of Dubai and Abu Dhabi.