March 15- Dubai hotel owners and operators are reconsidering the terms of investments proposed and the payback period allocated to them, it was learnt on Sunday. In fact, said analysts, some operators are even recalculating the revenues expected from the projects
A classic example of this is one hotel owner in Dubai who renegotiated the expected revenue from the project: "In this particular case, the owner was not lowering his expectations on revenue and asking the operator not to reduce the room rates, pointing out that the latter had promised a particular return and room rate, when they entered into a contract three years ago. But fetching that same high rate is absolutely impractical and impossible in today’s situation," explained Ahmed Ramdan, Chief Executive Officer of Roya International, a Dubai-based hospitality consultancy firm. The owner finally agreed to slash rates after consulting with the firm.
Meanwhile, the average hotel room rates all over the world, including the Middle East, have gone down in the past two years. Hotel owners in Dubai slashed rates because of this but while occupancy went up in the last two months, the revenue per available room (RevPar) has gone down.
While experts say that the low-rate trend will continue throughout the year, occupancy levels will rise. "It was not possible to maintain high room rates for many hotels. The reduction in room rates has come at a time when the hospitality sector will also witness an over supply, but I think Middle East hospitality sector will tend to benefit in the long run," said Faras Eid, Partner consulting with Deloitte & Touche, Middle East.
