Dubai weakens while Sharm El Sheikh improves

Hotels in Dubai have reported weakening performance trends, as RevPAR declined in November by 6.6% to US$340.06 compared to the same period last year, according to the latest HotStats data.

The contraction in room revenues was due to a softening of occupancies, which retracted by 1.1 percentage points to 86.7%, but led largely by a decline in ADR of 5.5% to US$392.37. The drop in room revenues also caused a decline in total revenues per available room (TRevPAR) by 2.3% to US$602.70, but was compensated in some part by an increase in food and beverage revenues that rose by 4.8% for the period. Profitability levels were under pressure as some key cost items such as payroll and sales and marketing inched higher for the period, causing gross operating profit per available room (GOPPAR) to contract by 4.3% to US$316.36.

‘‘Hotels in Dubai have begun experiencing several demand- and supply-based issues that have weighed down on performance levels for the period,” commented Peter Goddard, managing director of TRI Consulting. “The largest impact was seen through the deterioration of political and economic conditions in Russia and some eastern European countries that drive significant demand to the city. The declining rouble and higher rates in Dubai appears to have made many of them reconsider their trip to Dubai, but also diverted some traffic to Sharm El Sheikh and Istanbul, which offer a better value proposition. Additionally, new supply entering the market has also made the sector more competitive.’’

Performance improves in Sharm El Sheikh

Hotels in Sharm El Sheikh reported encouraging performance levels, led by a 46.3% increase in ADR to US$47.72 and a 2 percentage point increase in occupancies to 61.8%. As a consequence, RevPAR grew by 51.3% to US$29.51, pushing up TRevPAR by 28% to US$53.90. Despite an increase in payroll and other overhead costs, GOPPAR levels managed to increase by 67% to US$15.31, benefitting largely from the strong increase witnessed in average room rates for the period.

‘‘Egyptian hotel markets have made a comeback this year with both Sharm El Sheikh and Cairo reporting strong growth in RevPAR levels for the calendar year up to November of 2014,” Goddard said. “The confidence in the market is led by the efforts of the government to prioritize tourism and provide necessary security arrangements to protect its tourism assets, specifically for Sharm El Sheikh. Despite a strong growth in ARR reported for the period, Sharm El Sheikh still holds a strong value proposition compared to similar beach destinations in the region, and will be particularly attractive for key European source markets which are expected to drive performance going forward.”