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Laurent puts the spotlight on Dubai’s mid-market sector

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“The hotel industry in the region is being reshaped by digital and technological advancements, new market players particularly regional independent operators, changing consumer behavior, online distribution battle, oversupply of rooms and emergence of new forms of competition such as AirBnB.” These were the strong statements made by Laurent A Voivenel, Senior Vice President, Operations and Development for the Middle East, Africa and India, Swiss-Belhotel International.

Laurent was part of a panel discussion on the booming mid-market in Dubai and its ongoing effect on four-star and five-star operators at the Hotel Show in Dubai. He elaborated further stating, “We are increasingly witnessing a shift in key source markets to lower spending regions due to growth in low-cost carriers and expanding the middle class, and this necessitates the development of more mid-market hotels.”

Statistics from a few months ago stating that Dubai crossed the 100,000 rooms tally with a current inventory of 104,138 keys spread across 679 hotels. Of this only 38% fall within the one to three-star classification, with remaining 62% representing four-star, five-star or hotel apartments.

By 2020, Dubai’s goal is to reach 20 million visitors and 160,000 rooms. Laurent said: “Nearly 30% of hotels will be in the mid-market category in the upcoming supply but it will still be less than the demand. To reach the goal of 20 mn visitors by 2020, the city needs to achieve an annual visitor growth of seven to eight percent and this can only be achieved by targeting a wider range of visitors and mass tourism markets.”

Laurent further stressed, “The hotel supply pyramid is no doubt upside down. There is a huge percentage of luxury offerings at the top and relatively weak mid-market supply at the bottom. Oversupply of rooms in the luxury segment is putting a tremendous pressure on rates that in turn is affecting ROI. Dubai’s five and four-star rooms contribute more than 30% of hotel rooms that are available, whereas in mature markets five and four-star rooms make up only 10% of all rooms. Dubai is working towards growing its inventory of mid-scale hotels to address this huge market gap.

“Market Distortion is dictated by volumes which impact the average rate. If the volume of business is to grow at the pace of supply of key inventory then the market distortion will be minimum. Unfortunately, the supply is growing faster than demand which is putting pressure on the market. Operators and owners, therefore, need to tone down expectations. This could mean getting used to lower occupancies of 70% as an average rather than 80% which was normal until recently.”

Laurent concluded saying, “The solid foundation that the government has put in place through broadening portfolio of leisure and business attractions and facilities, diversification of source markets, the collaboration between various business sectors will continue to boost and sustain demand.”