Dubai Tourism Already Having Problems
Dubai Tourism Already Having Problems:”
Over the past years, Dubai has been steadily modeling itself as an upscale tourist destination. But it is already pressured by the global economic downturn and the major tourism projects are already defaulting.
According to this article from the Wall Street Journal , Dubai World, the emirate’s investment and holding arm, is on the edge of defaulting.
In addition to the major projects they hold in Dubai, they also own about 6% of the outstanding shares of casino giant MGM Mirage and 50% from the CityCenter project.
More about Dubai
The laid-back emirate has had some success in attracting visitors who seem drawn by what this exotic location has to offer: indoor ski slopes, horse races, famous property on the man-made islands and many more. As opposed to its neighbors, Dubai has a relaxed approach towards what tourists like: freely available alcohol and common beach attire.
Of course, such an approach towards tourism and attracting visitors has led many chains to open hotels here. Hilton Hotels, Starwood Hotels & Resorts Worldwide Inc, Hyatt Hotels Corp., Intercontinental Hotels Group PLC and Marriott International Inc all have properties here.
So far things held quite well during the recession so far in Dubai. The arrivals went up by 5% in 2009 but at the expense of slashing hotel rates and aggressive marketing campaigns. According to Dubai’s Department of Tourism and Commerce Marketing, 3.85 million visitors came to visit Dubai in the first 6 months of 2009. Ten years ago the emirate received 3 million visitors annually while 20 years ago only 600,000 visited the place during an entire year.
However, with more and more hotel rooms available in Dubai, the occupancy rate went down to 70% during the last part of the year. From January to June it stayed at a comfortable 87%. The reason? Dubai ended June 2009 with about 58,000 more hotel rooms than last year (a 17% increase) and the plans are for even more rooms to open within the next years.
Even worse, the revenue per available room (RevPAR) fell by 36% in October alone as the rates were slashed even more. Right now even 5-star accommodations offer rooms for about $100 a night.
Dubai gets only 6% of its revenue from oil and gas. In the early 1990s when it started marketing itself as a commercial center, there was a lot of development and high end hotels started to be build.
Right now it’s hard to predict what would happen. The added hotel rooms will definitely put pressure on all operators. It’s expected, all over the world, for the occupancy to stabilize but the room rates are likely to stay low.
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