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Fri 3 Jul 2015 01:57 AM

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US, Euro currency moves pose challenge to Dubai hotel profits

New report shows average room rates slump by over 10% in May, RevPAR falls by 8.7%

US, Euro currency moves pose challenge to Dubai hotel profits
A view of Atlantis The Palm on Palm Jumeirah. (AFP/Getty Images - for illustrative purposes only)

The combined effect of the falling Euro and stronger US dollar continues to be the key challenge facing Dubai's hotels, as average room rates fell by 10.8 percent to $271.64 in May, according to a new report.

Figures from hospitality data firm Hotstats showed that although occupancy levels remained strong at 83.8 percent in the emirate, up 1.9 percent over the same period last year, the fall in ARR resulted in an 8.7 percent reduction in revenue per available room (RevPAR).

The report also revealed that Dubai's four and five star hotels witnessed softer food and beverage demand, which had a direct impact on total revenue per available room (TRevPAR) and gross operating profit per available room (GOPPAR), falling by 11.7 percent and 14.5 percent respectively.

Hotstats said hotels in Jeddah also saw occupancy levels fall by 6 percent in May to 75 percent, forcing hoteliers to reduce room rates in order to maintain market share.

With ARR dropping by 10.6 percent to $258.19, RevPAR plummeted by 17.2 percent to $193.74, compared to the same period last year. Although higher food and beverage revenues helped offset the reduction in rooms revenue, TRevPAR and GOPPAR fell by 14.7 percent to $317.44 and 29.8 percent to $143.04 respectively.

The report said Doha hotels felt the effects of the summer slowdown early as performance levels dropped during May with a 1.3 percent reduction in occupancy to 74.9 percent and a 2.8 percent fall in ARR to $210.27.

The softer rooms performance saw a 4.4 percent decline in RevPAR, however stronger food and beverage demand resulted in a 4.9 percent growth in TRevPAR to $408.85.

The four and five star hotel market in Manama also experienced an early onset of summer as hotels recorded a decline in all performance indicators in May.

RevPAR fell by 13.1 percent during the month due to a 3.7 percent drop in occupancy to 49.6 percent and a 6.6 percent drop in ARR to $179.07 compared to the same period last year.

Kuwait hotels reversed the regional trend of falling performance levels with a growth in all key indicators, driven by stronger demand and higher room rates.

A 3.6 percent increase in occupancy to 55.9 percent allowed hoteliers to yield a 3.4 percent increase in ARR, resulting in a 10.5 percent rise in RevPAR to $148.72.

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