UAE Hoteliers feel the brunt of Russian turmoil

Declining hotel occupancy and retail sales concern hotel and restaurant operators in the region

Hoteliers feel the brunt of Russian turmoil.
Hoteliers feel the brunt of Russian turmoil.

Russian travellers form a significant part of the tourism industry in UAE and with the current upheaval in the Russia, paired with record low oil prices and rouble’s drop, hoteliers and retailers in the region are forced to deal with the drop in numbers.

Tourists account for as much as 35% of all spending in Dubai and the decline in Russians has had an impact, said International Council of Shopping Centres CEO David Macadam to Bloomberg.

Russian visitors to Dubai typically surge toward the end of the year and into early January, when many take their longest holidays. However, things aren’t the same anymore. Dubai Corporation for Tourism and Commerce Marketing’s chief executive officer Issam Abdul Rahim Kazim confirmed that Russian hotel guests in Dubai have dropped by 16% through the end of October compared with the same period a year ago.

The decline comes as an increase in rooms is hurting occupancy and profitability at Dubai hotels; an STR Global industry researcher quoted a 9.2% decline in revenue per available room.

“The middle and upper-middle segments collapsed completely” for travel companies, said Destinations of the World business development director Dennis Dolmatov. “Companies working with charter flights and with large tour operators have had declines of 30% or more. They are losing margins as well because they’re having to fight for each tourist.”

Hyatt International, which has six hotels in the UAE including four in Dubai, saw the number of its Russian guests drop by 15% since August, said regional vice president of Middle East sales Tareq Daoud.

Real estate business has also come under the knife. Russians were the sixth-biggest group of foreign homebuyers in Dubai in the year through Nov 15 after being fifth last year. Transactions totalled AED 2billion (US$544 million) in the period, compared with AED3billion (US$816million) for all of 2013.

Besides real estate agents, retailers in Dubai are also feeling the decline. Spending by Russian tourists dropped by about 10% this year, according to Euromonitor research manager Nikola Kosutic. Visitors from the country spent AED3.3billion (US$898million) last year.

“They are big spenders. They buy luxury goods, which are significantly cheaper in the UAE than in Moscow or St. Petersburg,” Kosutic said. Some retailers “won’t feel a thing, while others will have a devastating decline in sales.”

On the whole, Dubai’s economy grew at an estimated 4% this year, the Department of Economic Development said Dec 16. The International Monetary Fund projected growth of 5% in 2014 compared with 4.6% last year.

But not all is lost. The currency crisis hasn’t deterred the high-end travellers, who are still eager to book Dubai’s luxury hotels with an average cost of $30,000 per booking, Dolmatov said.

“The top five hotels in Jumeirah, like Burj Al Arab, are fully booked,” Dolmatov said. “We have had to put some clients on waiting lists.”

Dubai’s tourism authority isn’t completely run over by the Russian slowdown. The city continues to invest in marketing in the country, which “remains a key source market for the long term,” said Kazim.

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