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Sun 3 May 2009 10:54 AM

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Jumeirah Group eyes recovery after Q1 revenues fall 20%

Exec chairman says profits will be down, sees coming months as 'challenging'.

Dubai hotel giant Jumeirah Group said on Sunday it was hopeful of a recovery in its home tourism market towards the end of 2009 after seeing first quarter revenues fall by 20 percent.

Executive chairman Gerald Lawless said group profits would be down on last year while he described the coming months as "challenging".

He also said the company may not open the first of six hotels planned in China until May 2010, as the project faces another delay amid the global economic crisis.

Lawless said he was still "optimistic" its Shanghai project would come together if not by the year end, then at least before the World Expo, an international exhibition set to begin in the city in May 2010.

The luxury hotelier, famous for managing the sail-shaped Burj al-Arab hotel in Dubai, and its rivals have suffered as demand dwindles with many multinational companies forced to tighten their belts, hitting the hotel, travel and property industries hard.

"Profitability will not be the same as last year, but we're still ahead of our budgets ... the coming months will be challenging," Lawless said.

The group has 14 hotels under construction ranging from Shanghai to Phuket, Thailand and the Maldives as it looks to hit a target of 60 hotels under management by 2012.

It manages 11 hotels for investors - eight in Dubai - and the Carlton Tower in London and Essex House in New York.

Lawless declined to give financial information, but said revenue per available room (revPar) - a benchmark measure for the industry - had fallen 20 percent in its Dubai hotels for the first three months of the year.

"If we can get through the summer with good occupancies I think we could look forward to a relatively strong final quarter," he said.

Hotel occupancy in Dubai, which attracts Western tourists with its beaches and shopping, was down 15.8 percent in March while revPAR fell almost 41 percent, suggesting that hotels have been slashing prices, according to consultant STR Global.

Dubai gets 19 percent of gross domestic product from tourism and its economy stands to suffer as fewer people take holidays during the global downturn and retail sales and trade flows decline.

"We are saying to visitors you can now visit us, we have the availability and we are more affordable than we were," Lawless said, adding occupancy at its beach properties was above 90 percent. Occupancy rates in London and New York were "holding up", he added.

The slowdown in business travellers was a major drag on revenue and was an area Dubai would need to get "going again" as recovery could take between six months to two years, Lawless said.

Jumeirah aims to open its first hotel in Germany's commercial capital Frankfurt next April as it looks to position itself in the world's financial hubs and is eyeing "possibilities" in Germany and European cities including Paris.

It also has management agreements in Argentina, US Virgin Islands and Costa Rica, he said.

"We'd like to be in the key cities across the world as a luxury brand and there's a lot of opportunity for growth in the hotel industry in China," Lawless said, adding it planned five more hotels in the country over the next three to four years. (Reuters)

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