Return to spender: will tourists drive the UAE's Covid recovery?

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By Gavin Gibbon

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By Gavin Gibbon

The UAE’s hospitality industry is open for business and showing strong signs of recovery after the crippling economic impact of Covid-19

UAE hotels are continuing to see an improvement in business, with occupancy levels rising in recent weeks

A typical UAE hotel needs to maintain 40 percent occupancy to break even

The UAE’s hospitality industry is experiencing a strong rebound after the summer-long restrictions introduced to curb the spread of coronavirus. The return of international tourists to Dubai and the increase in staycation activity as UAE residents remained in the country helped to underpin what is proving to be a solid recovery.

That has to be welcome news not just for the sector but the UAE economy as a whole. According to the World Travel and Tourism Council’s (WTTC) 2018 Annual Research report for the UAE, the sector’s total contribution to the nation’s GDP was AED164.7bn ($44.8bn), which is 11.1 percent of the total. That same year, the industry directly and indirectly accounted for some 611,500 jobs – or 9.6 percent of all employment in the UAE.

As the crisis hit, though, the sector went into freefall. According to valuation consultancy Cavendish Maxwell, as of June 2020, 16 percent of the UAE’s hotels tracked had either closed or operated at minimum capacity. On a room basis, 27 percent had closed in Dubai versus 8 percent in Abu Dhabi.

Rotana’s UAE portfolio is starting to show signs of life again

In the same month, Dubai’s RevPAR crashed by 73.5 percent compared to June 2019, with Abu Dhabi’s falling by 13.6 percent. Abu Dhabi’s resort industry in particular saw RevPAR fall by 48 percent, while Ras Al Khaimah and Fujairah stood at -32 percent and -42 percent respectively.

In total, Q3 2020 is predicted to see RevPAR decline by 65 percent for Dubai and 42 percent for Abu Dhabi’s resort sector. The UAE capital’s hotel sector could do slightly better, with RevPAR only slated to drop by 17 percent. Ras Al Khaimah and Fujairah, meanwhile, are forecasted to decline by 36 percent and 43 percent when compared to Q3 2019 performance.

Room for manoeuvre

Cavendish Maxwell’s research suggests that a typical UAE hotel needs to maintain around 40 percent occupancy to break even. Speaking to most hotel operators in mid-August, though, and optimism abounds, with the majority claiming that figure is not only being met, but targets exceeded, even so soon after the end of lockdown and as the virus still rages across many parts of the world.

The increase in staycation activity in the UAE helped to underpin what is proving to be a solid industry recovery

Dubai-based Jumeirah revealed that in the first week following the reopening to international tourists, online bookings for planned stays on Jumeirah’s website doubled from the previous week, while its properties registered an average daily increase of 109 percent in booked room nights.

“We have received considerable interest from international markets, particularly Europe and Russia,” says Jose Silva, CEO of Jumeirah.

In terms of the domestic market, Dubai saw strong pick up in numbers as hotels created offers to meet pent-up demand for staycations. Beach properties, for instance, registered occupancy rates of above 80 percent over the weekends.

“The domestic market has proven extremely important and we are seeing increased demand at Jumeirah, particularly over the weekends. Dedicated staycation offers are helping to drive ongoing interest together with the introduction of new dining concepts to enhance the experience,” adds Silva.

Hospitality chain OYO says the financial impact of the recent lockdowns and government imposed travel restrictions on its operations in the GCC market was lower than most of the global hotel chains. The Delhi-headquartered chain also said OYO is currently fully operational in the UAE and Saudi Arabia, barring a small number of partners who have chosen to keep their properties closed for various reasons.

Jose Silva was appointed CEO of Jumeirah Group in March 2018

“Our revenue fell and occupancies dropped by over 50-60 percent. This is better than the industry benchmark where global leading hotel chains have experienced drop in revenues by as much as 75 percent,” Manu Midha, OYO’s Middle East Head, tells Arabian Business.

Occupancy levels at the Palazzo Versace Dubai, meanwhile, have increased to up to 70 percent during the week and 90 percent at weekends, according to managing director Monther Darwish, who hailed the strength of the UAE staycation market.

Darwish told Arabian Business that the hotel, now approaching its fifth birthday, remained open throughout the crisis, despite the lockdown measures. He reveals that an intense marketing campaign, costing “millions of dirhams”, which included reaching out to around 400 influencers, has produced promising results, with 2,700 people welcomed through the doors on a particular Friday last month.

“During those tough times we took a decision to go very intense in the marketing to market that we are the most fashionable and safest hotel in town. We started taking the procedures, from disinfecting gates to sanitising the rooms, and the hygiene all over the place in the hotel and we started a big push in this manner.

Monther Darwish, managing director of Palazzo Versace Dubai

“We started engaging many influencers. We want to position ourselves in the client’s mind that it is the safest. We succeeded in this and that’s why we’re seeing our reservations up to 60-70 percent during the week and at the weekend, 90 percent. It is purely local business. A lot of people said they didn’t know about us; now they are hearing about us.”

Hospitality group Rotana revealed its UAE portfolio is also starting to show signs of life again after a long and challenging period during the pandemic. The company’s hotels in the country have seen growing occupancy rates, with the portfolio reaching an average of 60 to 65 percent occupancy at weekends.

Inbound interest

While Abu Dhabi is still focusing on domestic guests, Dubai’s decision to welcome international travellers has resulted in 5-6 percent of its hotel bookings coming from overseas visitors.

Hotels should focus on creative offerings to differentiate themselves and attract consumers

While staycations have been invaluable to the industry since it reopened to UAE citizens and residents back in May, Accor, the Middle East’s largest hotel operator, also revealed strong international interest, mainly coming from the UK, US, France and Germany, as well as demand from local markets including Morocco, Jordan, Egypt and Saudi Arabia.

The French multinational hospitality and leisure company operates 299 hotels across the MENA region, with 134 in the Middle East and 64 in the UAE. Some 45 of those are in Dubai, with 9,900 rooms in the emirate alone through brands such as Raffles, Fairmont, Sofitel, Novotel, Ibis and Mercure.

Mark Willis, CEO MEA Accor, tells Arabian Business: “If there’s another location that markets itself better than Dubai, I don’t know where that is. They pitch themselves so fabulously globally.”

Due to lingering travel restrictions and the massive impact coronavirus has had on businesses, many of the UAE’s hotels could still remain closed or operate at minimum capacity further into the year, according Cavendish Maxwell.

Mark Willis is the CEO of Accor for the Middle East and Africa Region

Dubai welcomed more than 16.7 million visitors last year, and before the pandemic crippled global travel, the aim had been to reach 20 million arrivals in 2020. However, Willis believes that the real recovery of the industry will not be felt until the middle of 2021.

He says: “Of course, Q1 next year, people will be watching their expenditure from a business perspective and those people on leisure travel will be doing the same having had a very difficult 2020 when things have been very uncertain on a number of fronts. But I do believe once you get out of Q1 and into Q2 you’ll start to see recovery and then Q3 and Q4 I think you’ll start to see things rebound.”

According to the World Tourism Organisation (UNWTO), the Covid-19 pandemic could cost global tourism and related sectors between $1.2tr and $3.3tr in lost revenue depending on the timing of recovery.

However, the UAE has been praised for the decisive action taken and the safety measures installed at the airports and across the various hotels, with individual brands launching their own initiatives and campaigns to ensure the health and safety of guests is paramount.

Over 1,000 establishments have received the “Dubai Assured” stamp from Dubai Tourism, while the emirate has been recognised by the WTTC, which gave the city a “Safe Travels” stamp in recognition of the stringent  measures taken to combat Covid-19.

Helal Saeed Almarri, director general of Dubai Tourism

“As we continuously assess the situation and take steps to consolidate the industry revival that is underway, we expect to see good progress in the last quarter of 2020 based on strong growth strategies that we have adopted to accelerate momentum ahead of the full reopening of the sector,” says Helal Saeed Almarri, director general of Dubai Tourism.

It certainly seems more like welcome back than a do not disturb. In 2020, it’s the kind of break the sector needs.

How the sector can fully reopen with confidence

Gerald Lawless, former president and Group CEO of the Jumeirah Group, outlines his five-step plan to accelerate the travel and tourism sector

1. Rapid-results testing

“Testing is hugely important for the travel industry – not just here in the Gulf but worldwide. Ideally, travellers need a system whereby they are tested as part of the pre-check-in process before the flight, with the results determining whether they are free to proceed to board or not. This would provide peace of mind that all fellow passengers are Covid-19 free and remove the need for quarantine at either end of the travel journey.”

2. Safety protocols

“Widespread adoption of the safety protocols put forward by The World Travel & Tourism Council (WTTC) in collaboration with the World Health Organisation will also provide confidence that the highest standards of safety and hygiene are being applied in hotels, entertainment centres, attractions and malls. DTCM, Ras Al Khaimah and Yas Island have each been awarded the “Safe Travels” accreditation, while Jumeirah have also been awarded the Bureau Veritas Safeguard accreditation in many of their UAE hotels.”

3. Insurance

“In the UAE, Emirates took the lead in late July to become the first airline to provide free passengers’ health and quarantine coverage if diagnosed with Covid-19 on their travels. This model could be replicated across all regional carriers.”

4. Marketing

“It has been encouraging to see UAE tourism boards such as DTCM and Ras al Khaimah engaging global and domestic markets with incredibly powerful, exciting and interesting promotional campaigns to tell people that their emirate is open and safe. It’s also important that communication at a country-to-country level leads to the UAE being added to “green-list” nations in key source markets such as Europe. The UAE’s efforts really deserve to be recognised around the world.”

5. Collective responsibility

“The fact that wearing masks and temperature checks going into offices and malls is accepted by everyone in the UAE is something we can all be proud of. In order to ensure that the travel and tourism sector can look forward with optimism relies on everyone continuing to respect the regulations.”

Good openings

Despite the challenging environment, Dubai is set to welcome a number of new hotels this year

Avani Palm View Dubai Suite & Residences

The 48-storey new-build property will be the third Avani in Dubai and will represent the debut of Avani residences in the region and is set to open by the end of the year.

The Wyndham Dubai Deira and the Super 8 by Wyndham Dubai

The latest additions to the Wyndham portfolio, the largest hotel operator in the world, are set to open in October – and all on Deira’s waterfront.

Sofitel Dubai Wafi

We have been watching this giant flask-like structure rise into the sky for the last few years, and now it’s almost ready to unveil its 595 rooms and host of entertainment facilities.

The Côte D’Azur Resort

Part of the $5bn Heart of Europe development on Dubai’s famous World Island project, this luxury resort is set to open on schedule in the fourth quarter of 2020.

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