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Sat 7 Apr 2012 10:56 AM

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Abu Dhabi hotel limits 'to have little impact'

Hospitality expert says move unlikely to boost occupancy, rates in the short term

Abu Dhabi hotel limits 'to have little impact'
(Image for illustrative purposes only)

Abu Dhabi's decision to limit the number of new hotel licences will have little impact on occupancy and rates in the short term, a hospitality industry expert has said.

Peter Goddard, managing director of TRI Hospitality Consulting in Dubai, said the move came as "no surprise" as the Abu Dhabi government has a vested interest in many of the hotels operating in the UAE capital.

"The decision to freeze or limit new hotel licences does not surprise me as similar controls were enforced in the 1990s, specifically the controlling of liquor licences," he said.

In Abu Dhabi, the government has an equity stake in many hotels and thus have a vested interest in maintaining reasonable occupancy levels.

"The short term effect on occupancies and average daily rates of limiting hotel licences is likely to be insignificant, albeit medium to long term, reduced number of hotels will mean higher occupancy and higher average daily rates." added Goddard.

According to the latest HotStats survey of full-service hotels in six MENA cities by TRI Hospitality Consulting, Abu Dhabi showed a drop in demand while Dubai showed mixed results.

Hotels in Abu Dhabi reported a drop in all major performance indicators in February, with occupancy and average room rates down three and 28.8 percent respectively.

Revenue per available room (RevPAR) also fell by 31.6 percent while profits for the month stood 35.3 percent below the same period last year, making Abu Dhabi the only GCC city amongst the four surveyed by HotStats to post a gross operating profit decline.

"There was a notable decline in Abu Dhabi hotel performance in February compared to the same month last year. However, this is more due to the strong performance of the hotels last year rather than a flat performance this year," said Goddard.

The decline in hotel performance in the emirate was mainly caused by an influx of supply over the last 2-3 years as growth in supply outpaced the growth in demand, he added.

In Dubai, hotels reported a 4.3 percent drop in occupancy in February compared to the same period last year while the average room rate rose by 2.9 percent, resulting in a two percent drop in RevPAR.

On the bottom line, Dubai hotels posted a marginal growth of 0.9 percent for the month compared to the same period last year.

In Jeddah, occupancy and average room rates at four and five star chain hotels increased 7.5 percent and 10.7 percent respectively, compared to the same period last year as the city saw a surge in tourist activity during the closing weeks of Jeddah Shopping Festival.

Hotels in Riyadh reported mixed results in February as occupancy levels increased to 70.8 percent, but average room rates declined marginally.

The HotStats survey showed hotels in Egypt have started a recovery but they remain a long way from their previous highs prior to the Arab Spring.

Hotel performances in Cairo and Sharm El Sheikh have remained subdued since early 2011 when the popular uprising and related violence started.

Tourist arrivals in Egypt has declined by 32 percent to 10.2 million visitors and revenues dropped by 30 percent to $9bn in 2011 following the political uprising in the country.

"Hoteliers are reporting greater stability on the ground which might reflect an improvement in hotel performance in the coming months. A strong recovery in tourism arrivals is unlikely as long as the risk of violence remains", said Goddard.

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