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Over supply and Demand

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By JS Anand, CEO, Leva Hotels

There is no doubt that UAE is a world-class destination, and Dubai enjoys a central position, geographically speaking, and that will continue giving the hospitality industry an edge over the rest.  The UAE hospitality industry sees an annual growth of 7-8% with over 2 million room nights being added every year so one can’t exactly say that there is a situation of oversupply when there is a steady demand. We can expect UAE’s hospitality sector to experience a strong, sustain growth in the years to come. Room inventory in the 3 star and 4 star category is projected to grow at 10 percent and 13 percent respectively through to the end of 2019.This is more to do with the collective environmental impact of the tourism industry and is not just fuelled by the anticipated demand of Expo 2020 alone.

But with regards to occupancy room rates, there is arguably an oversupply which is evident by a ‘rate war’ that is currently going on in the market due to which profitability is taking a beating in the bargain. The average room rates in this region has dropped considerably due to an increase in supply, which in turn leads to low performance levels.

One thing is a given, the region has a strong ability to understand different customer needs. Various factors will continue to fuel the steady demand in the years to come especially growing relations of the UAE with our prospering neighbours, India and China, will play an important role in maintaining a stabilized demand. With the recent visa on arrival policy for the Chinese, over a million Chinese tourists alone are expected to visit the UAE this year. The number of tourists from Russia, Southeast Asia, UK, Latin America has also increased since last year. Having said that, to cater to this demand, there is an increase in supply of new hotels which has orchestrated a rate war and forcing brands to focus more directly on their volumes and service delivery to sustain in the big game.

To meet our ambitious targets, this change demands a new strategic approach, one which will enable hoteliers to understand market trends and enhance capabilities required to thrive in this new landscape. It is imperative to deliver a lasting impression to not only meet and satisfy demands but help induce repeat visitation as well. Hoteliers need higher volumes of guest to be able to compete. The market is over-saturated, and we need to increase our footfall. Products and services will have to be tailored to cater to local experiences and value for money, to expect better conversions. A cookie-cutter approach will only spell disaster for the industry.

We must understand, that the hospitality industry is such that the services are often the product. We are looking at the bigger picture, and with the Expo 2020 around the bend, we expect a boom in the hospitality industry. There will definitely be higher competition in the market as the number of hotels will go up, and hoteliers will have to play the volumes game backed by an unmatched customer experience in order to sustain competition.