Dubai hotels should collaborate in establishing minimum price parametres

Hotels in Dubai should seriously collaborate in establishing minimum price parametres across the sector while adapting flexible pricing strategies to continue providing consumers with freedom of choice,  a panel of hoteliers revealed during a discussion on "War Games - Fighting the Rate War" at the Hotelier Middle East Great GM Debate 2017.

Moderating the panel discussion which took place at Le Meridien Dubai Hotel and Conference Centre was TRI associate director Christopher Hewett, with the following hoteliers participating in the discussion: Rotana Hotel Management Corporation area vice president, Dubai and Northern Emirates David Prince; Southern Sun Abu Dhabi general manager Pierre Delfau; Radisson Blu Hotels, Dubai Waterfront & Dubai Canal Views cluster general manager David Allan; and Frasers Hospitality area manager Middle East & Africa Cyril Warsono. 

Moderator Hewett first brought up the question of whether or not consumers have the upper hand in the UAE when it comes to hotel prices.

Warsono answered affirmatively saying that the internet provides consumers with freedom, flexibility and convenience when selecting hotels and making price comparisons, utilising his own personal experiences as a business traveller in an anecdote.

"We want to see where is the value for money that we have," he said. "And the second thing is, we want to try a new experience."

With the variety of choices available to consumers, Warsono stressed the importance of providing the guest with a quality experience in order to entice them to return, reminding the panel that, ultimately, that this move will pay off for hotel owners and shareholders.

"That’s why as hoteliers we have to think, what can we do that will make our guests come back?" he said. "So we have to take that into account, my internal customer and my external customer."

Allan also concurred that the consumers' freedom of choice is paramount.

"As consumers, we despise industries that have control over us", he said. "It should all be about freedom of choice and about hotels adapting."

When Hewett brought up a suggestion, earlier mentioned in the discussion by Delfau of a pricing best practice adopted by hotels in Abu Dhabi which together, essentially agreed to set a minimum bottom pricing parametre for their destination, Allan initially demurred. The rest of the panel, however, was quick to embrace the suggestion for Dubai.

"Only a cartel would do that," Allan said, when referring to suggestion of the hotel sector collaborating on setting a minimum pricing standard and instead, pointing out that the issue boiled down to inadequate demand, an over-supply and hotels' general lack of segmentation strategy.

"As a hotel, we need to identify the segments. It should be about hotels being intelligent and saying,'I’m going to target this and at this particular rate' and other hotels being able to say, 'I’m going to walk away'," he said. 

"The issue we have is just about everybody is fighting for pieces of business where there’s just not enough," he added.

"Unfortunately I think the industry has become commodified," Prince said, agreeing with Allan. "The web has been a contributor of that and that’s not going to go away."

Yet he too brought the Abu Dhabi hotel sector pricing strategy back to the discussion table, saying: " I do question though whether strategically, are we being very wise?" He cited the differences in pricing strategy between the airline and hotel industry, with airlines generally pricing low on advance booking windows and building rates along with high demand.

"If you look at what’s happening in Dubai and Abu Dhabi, you’ve got high rates far ahead then we start to panic then it comes down. We are sacrificing our own integrity as a brand," he said.

He stated that the tactic of setting a price minimum for the Abu Dhabi hotel sector resulted in some general managers who were "actually relieved."

When questioned regarding implementing a similar strategy for Dubai, Warsono said he fully agreed."This is something which I have always believed" , he said, citing the example of Istanbul hotels' difficulty in raising prices citywide once they had dropped during a spate of political instability in the country. "This is something that we in Dubai should watch out for. As a hotel, you have to know where you’re going and where your bottom is, otherwise it is very difficult to come back."