Market Update: Fierce competition in Abu Dhabi

Hoteliers are feeling the heat as competition grows fiercer, and are being innovative and staying on top of their game in a bid to secure custom

Operators

The first half of 2017 has seen a 7% year-on-year surge in hotel visitors to Abu Dhabi, with the emirate’s tourism and culture authority reporting a total 2.25 million guests across its 165 hotels and hotel apartments.

The emirate — home to landmarks such as the Sheikh Zayed Grand Mosque and the 302-room Emirates Palace — has benefited from a push in tourism following the government’s roll-out of its “global destination campaign”, which included a two-series TV commercial broadcast across the GCC and international markets, focusing on its core markets of the UAE, India, China, the UK, Germany, and the US.

In June alone, hotel guests to Abu Dhabi increased by 30% year-on-year. Guests from Saudi Arabia doubled and Chinese visitor rates were up 78.5%, month-on-month.

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HE Saif Saeed Ghobash, director general of Abu Dhabi Tourism and Culture Authority (TCA Abu Dhabi), said: “We are on track to achieve our forecast guest arrivals growth for the year, and we are well placed to maximise these opportunities as we head into the second half of 2017.

“Eid Al Fitr has been a springboard for these figures as Abu Dhabi welcomed record-breaking numbers of visitors, with many of our leading hotels achieving near full occupancy, with tourists from across the world choosing Abu Dhabi as the place to spend their holiday.”

According to Filippo Sona, head of hotel at Colliers International MENA — a global commercial real estate company — tourism to Abu Dhabi has received a boost from greater efforts on the government’s part to tap into the Chinese and Russian markets. The introduction of the Dreamliner service with daily flights to Beijing, and visa on arrival for Chinese and Russian visitors are examples of this.

Overseas visitors are increasingly attracted to the destination by its unique sightseeing opportunities, such as the sustainably built Masdar City, and domestic tourism is also growing — it was up 28% month-on-month in June.

‘Staycations’ are becoming popular among local visitors, asserted Christopher Hewett, associate director at TRI Consulting Middle East. He said: “The rise in domestic tourists is a result of Abu Dhabi hotels targeting UAE residents and enticing them to visit the emirate on a staycation. Abu Dhabi’s lower room rates than neighbouring Dubai provides residents with affordable vacation options.”

With rising tourism levels, hotel developers are increasingly attracted to the city, too. The Grand Hyatt Abu Dhabi recently opened, and 2018 will see further newcomers including the Saadiyat Rotana Resort & Villas, the Fairmont Marina Abu Dhabi, and the Edition Abu Dhabi.

Earlier this year, Emaar Hospitality Group announced it had secured the management contract for Vida Beach Reem Island Abu Dhabi, an “upscale urban lifestyle resort”, expected to be operational by 2020. Speaking to Hotelier Middle East, Emaar Hospitality Group (EHG) CEO, Olivier Harnisch, explained Abu Dhabi is growing in appeal to developers thanks to its “growing tourism and business hubs”.

Vida presents an opportunity for EHG to expand its presence in the UAE “Abu Dhabi is embarking on ambitious infrastructure development projects as part of its development vision, which will further energise its tourism and business sector. This presents a strong opportunity for the hospitality sector, as the expansion and addition of new leisure attractions, business centres, and events will drive demand for our industry,” he added.

But while occupancy levels are soaring, this flood of hotels to the market means competition among hotels is becoming fierce. Average daily rates have “continued to soften,” said Hewett, attributing this to hotels adopting a “demand-led” revenue strategy in a bid to counter the strong competition. RevPAR also fell 12% year-on-year, according to Colliers International.

Dusit Thani has had a presence in Abu Dhabi for the last three-and-a-half years. It’s general manager, Desmond Hatton, explained to Hotelier that during its time there, the target business segments had “changed considerably”, driven by the ever-evolving market.

“The companies and business houses have squeezed their budgets and hotels are facing a tremendous challenge to offer luxury at reduced price-points to sustain this overheated competition,” he said.

Despite this, however, the future looks anything but bleak for operators. With the government pouring in significant investment to reposition the emirate as a cultural and art hub, more projects are set to come online soon, including the Louvre Abu Dhabi by 2018, Guggenheim Museum, and other cultural attractions. It is hoped this will drive more tourists to the destination.

“The Expo 2020 Dubai will also benefit Abu Dhabi with the visitor overspill,” said Hatton, pointing to other upcoming events, such as the Formula 1, ADIPEC, and World Skills, which he anticipates will bring “some revival” following the “salient drop in ADR” for the hotel.

Further leisure-orientated developments have been planned for the city, including the recently announced Warner Bros Theme Park and Hotel, and the tallest indoor climbing wall, Clymb, on Yas Island — together with new flight routes, these are expected to have a positive impact on the average length of stay and occupancies.

Hewett said that in the near-term, the market would be challenging for hoteliers but, if able to “achieve a marginal gain” in occupancy levels over 2016, it would help the softening of average room rates across the city.

While a brighter looking future — thanks to all the projects due to come online — is predicted by industry experts, hoteliers are being warned not to become complacent and to instead take steps to secure future business.

“Hotel operators may have to continue creating packages and promotions with add-ons, such as discounted tickets to attractions or events, to encourage bookings and increase guest spending and satisfaction,” said Sona. “Guest spending may also be increased through F&B and other leisure activities in the case of beach or leisure properties. This will help cushion the effect of a lower RevPAR. Having said that, most hoteliers will have to look at creating an efficient and well-oiled operation in order to maintain profitability for the owners.”

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