Introduction

As the world is shrinking in terms of global connectivity and we are becoming more mobile,

there is a surge in demand for the hospitality services which is primarily focusing on the

expansion of Hotels business across globe and Dubai being one of the top leading hotel

industries is also going on the same line of shifts occurring globally. So our objective is to do an

assessment of the overall hotel industry set up in Dubai and to understand the shifts in Industry

trends and also to account for the key issues faced by the industry.

Dubai is the leading business class city of the seven emirates of UAE and serves as a global hub

for business pioneers in oil industry, tourism sector , real estate and as well as financial

institutions. Although Oil trading is still the largest economy driver of the city but with the

increasing international travellers, Dubai is generating heavy revenues from tourism business and

to be on the topmost tourism spots like western counterpart, it is utilizing its wealth to promote

tourism business by investing more in city’s infrastructure and facilities. It is also becoming one

of the favourite hotspots for conducting sports events. The tourism in Dubai is a flourishing and

fastest growing business and according to the figures, it is contributing twenty one percent to the

GDP.

Trend shows, that passengers footfall is increasing every year and it is estimated to reach f

million in 2012 as the passenger traffic will pick up more with the ongoing expansion of tourism

hub and now even airlines are set to have increased fleets and business travels after the recent

global downturn as a part of their business recovery process. This has also brought the exchange

of foreign earnings and led to massive employment of skilled labour in the industry to sustain the

demands.

As a tourist, attraction starts right at the Dubai duty free at airport. It offers premium class

products at reasonable prices. It covers the exclusive range of liquor, chocolates, and perfumes in

the largest selling category. Then there is Dubai shopping festival that happens in the month of

January and which attracts tourists from all over the worls. All international brands are available

at discounted prices to give the best shopping experience and it feels like the paradise for

shopaholics.

Then visitors can also enjoy watching the traditional sports events of Dubai like falconry, camel

racing, and horse racing that are famous all around. Dubai is also a place popular for its

adventure sights and camps like Desert Safari, which is worth seeing to experience the activities

such as sand dunning, quad biking and belly dancing. Then moving on to other sites, there are

beautiful sandy beaches ideal to lie down and relax. At night, one will get amazed to see the

skyline of Dubai. Burj Kalifa, the tallest tower in the city standing in a middle of malls has

become the center of attraction because of its great architectural design. Dubai is world famous

for its luxury hotels and its services and to name a few top hotels, we have Burj Al Arab,

Atlantis, Aramani, Jumeirah etc.

As tourism serves the main market for hotels and restaurant services, increase in visitors’ traffic

over the past ten years has resulted in a corresponding boom in the hotel industry. New hotels

have mushroomed in the city with a simultaneous increase in the services being offered. The

CEO of luxury hotel chain Starwood told Arabian Business that he expects to see further hotels

built in Dubai, after occupancies remained high in 2011. Even at the time of economic

downturn, there is a sustained demand for hotels. Now coming to the hotels figures, one can also

correlate this with the passenger traffic in Dubai. There are five hundred and seventy six hotels

in Dubai comprising of seventy five thousand three hundred and ninety nine rooms. This number

is expected to reach fifteen million by the year 2015.

Overview about the Dubai Hotel Industry

Hotel can be seen as a commercial residential area where a guest or a traveller can avail its

multiple offerings and services on paid basis.The services broadly include lodging

, restaurants, transportation and operations like housekeeping facilities, infrastructure utilities etc.

The industry apart from offering accommodation and food and service also offers recreational

services like theme parks, sports club etc. For example Atlantis the palm, the five star resort,

includes Aqua venture theme water park and Dolphin bay in which guests can swim and

interact with dolphins.

Characteristics of Dubai hotel industry

Some of the characteristics of Hotel industry are as follows:

Intangible: Hotels do not sell rooms, they only let the right to use to use that room for a

particular period of time or in other words they only sell the services. As services cannot be seen,

felt, touched or smelt before consumers actually purchase them, therefore the industry is

intangible in nature. Hotels should understand that the consumer satisfaction is transient and

considering the number of passenger traffic, it is imperative for hotels in Dubai to create an

impact in the minds of consumers.

Inseparable

Hotel owners and guests are inseparable since it is very rare for a transaction to take place

without both the parties present. Also, a customer would not go for a hotel if he is not happy with

the attitude of the manager or if the service is inappropriate. As Dubai has a large number of

hotels, therefore customer has a variety of options to choose from. For that matter, the behavior

of the service provider plays an important role. Moreover, inseparability also exists between

various groups of customers where one group by being noisy and clamorous can affect the

decision of other group. Therefore it becomes very crucial for hotel employees to understand the

things that might impact the consumer employee interaction.

Variability

The fluctuating demands for hotels in case of Dubai make it variable in nature. For example at

the time of Dubai Shopping Festival, the demand for hotels increases at a significantly high

level. It is this fluctuating demand that makes it difficult to provide the consistent quality of

service during the peak season when the demands are high. So the quality of the service that is

provided depends on where and when that service is provided. Since demand cannot be

controlled therefore variability is inherent in case of Dubai hotel industry.

Perish ability

The service industry’s final output is transitory and not permanent since a hotel room cannot be

stored. For example Atlantis is not able to sell a room on a particular day; it cannot store it in the

inventory and sell the following day since the revenue from the sale of that room for that

particular day is lost forever.

All of the above factors are directly linked to occupancy rate of a hotel, so it makes more

important for a hotel to understand and fulfills the customer needs and comforts.

Key products and services of Dubai hotel industry

Hotels provide a combination of core and supplementary services. Since the core services are

essential in most of the hotels, therefore management needs to excel on the supplementary

services in order to attract customers. It is pertinent for any hotelier to keep adding new services

in the product mix based on the preferences of consumers. At the same time modifications in the

existing strategies is also required.

A product mix includes good lodging services as well as other essential facilities like light,

water, electricity, sanitation, recreation and so on. Hotels should make consistent endeavors to

improve the quality of their services particularly the accommodation and housekeeping services.

Resort hotels like Madina Jumeirah and casino hotels, for example, offer a variety of activities to

keep travelers and families occupied for much of their stay.

Key product attributes in the hotel industry

The role of defining product attributes is very important as it forms the basis for measuring

quality of hotel services. In a hotel service industry, some of the key attributes on which

customer expectations lie upon are:

Hotel Image – It covers the overall market reputation of a hotel, its standing against competitors,

star rating and customer recommendation, brand recall in customers’ mind etc.

Hotel Facilities – It attributes for the facilities available in a hotel such as entertainment clubs,

pools, theme parks, hotel surroundings etc.

Rooms – Interiors, décor, cleanliness, bedding, provision of amenities, equipments and fittings,

type of suite, wi-fi connection etc. attributes to the room quality.

Price/Value – It includes room tariffs, package deals and offerings in general that provide value

add to the money spent by a customer.

Marketing – Hotel advertisements, blogs on social media, association with tour or travel

companies also create an impact in the mind of customer.

Food & Beverage – It includes range of food options available, drinks menu, world cuisines, bar

and pubs and quality of food.

Range of Services – This category is attributed by support services like, reservation

management, help desk support, room availability status, transport services and so on.

http://ro.uow.edu.au/cgi/viewcontent.cgi?article=1281&context=commpapers

Technology used in the Dubai hotel industry

Advancements in Information & Technology Sector have a great role to play in supporting hotel

services. Because of the growing competition and demands, hotels are leveraging the use of

technology at its best to be on the competitive edge to deliver quality services and maximize

guest satisfaction and comfort level. Going by the last decade, IT sector has reshaped the hotel

infrastructure with the technology oriented solutions.

Dubai Hotels are deploying latest machineries to automate their operations and reduce manual

work in order to increase the productivity and bring down inefficacies in business. There are

digital IT solutions for managing sales transaction, preparing financial reports, software’s for

inventory and supply chain management, and business intelligence software’s and data mart to

maintain databases for keeping customer records and identifying potential target pool. IT has

also helped the industry to go online over the network globally which in turn has provided

customers an easy and convenient option to go with the online reservation.

As one of high end use of technology, hotels such as Burj Al Arab have already introduced a

smart card system for their high profile guests. This card works as an ID system, which once

activated for a customer profile will identify that customer on his arrival and then automatically

direct that customer to his room.

http://consultbenefit.com/it-tools-for-your-biz/technologies-that-help-the-hospitality-industry-

cut-costs-and-increase-efficiencies

Hotel Industry Structuring

With the adaption of global business model, industry is adjusting to meet the demands of an

international market visa-vise distributing their business globally. This has led to the shift in the

organizational hierarchical structure and industry is reshaping to the rapidly changing

market.There is an increased focus on the strategic management restructuring by means of which

Dubai Hotel Industry is capitalizing on vertical strategic work partners or mergers that would

allow the business to expand at a larger scale in this maturing market.

Hotel companies are realigning themselves with the decentralized and flatter across other

demographics in contrast to have one centralized authority as used to be the thing of the past.

This is because decentralizing the forces would help to narrow down the distance and putting the

staff closer to the customer would definitely help fulfill their needs better. This change is also

facilitated by the ease of sophisticated IT and telecom channels for quick and better networking

across globe. Advantages following this line of thought are that vertical integrations can position

a company across boundaries with better services control and delivery and that too with the

common branding. This would also help to save on supply chain as having the integrated

company to a greater market presence and it becomes more accessible to different sources

http://www.hotel-online.com/Trends/Andersen/global.html

http://books.google.co.in/books?

id=W0a6PFMAxGYC&pg=PA40&lpg=PA40&dq=how+hotel+companies+are+integrating+vert

ically&source=bl&ots=4RueK_09yR&sig=bfwfW7XENI0qXsdU1h2BHEapI5A&hl=en&sa=X

&ei=KUZvT8bGF4bwrQeR8-CgDg&sqi=2&ved=0CFEQ6AEwBQ#v=onepage&q=how

%20hotel%20companies%20are%20integrating%20vertically&f=false

Key suppliers to the Dubai hotel industry

Hotel industry’s supply chain implies a complete a flow that starts with purchase of raw

materials and then finally getting transformed into a product or service that can be rendered to

end user. Dubai hotel industry’s key suppliers include the following:

Raw material supplier

These are the suppliers who deal in the supply of unfinished basic goods. Basically in

hotel industry raw material is required in construction work, architecture design, interiors

décor etc. These suppliers are mostly termed on contractual basis because of the nature of

the demand which is required in bulk.

Skilled resources & labors

These are the skilled human resources hired and trained for their jobs to perform hotel

operations.

Information technologies

IT companies supply digital technology software solutions that streamlines and automates

the hotel back office and front end operations such as sales transactions management,

financial reporting tools, analysis soft wares, telecom connections such as printers, fax

machines, Wi-Fi etc.

Food & catering

It includes supply of food items ranging from raw vegetables to the processed food,

bakery and confectionary items, drinks & beverages.

Consumers of the Industry

Based on customer needs and expectations, Dubai Hotel Industry has primarily classified its

consumer targets in the following categories.

• Solo Travelers/ Backpackers – This segment of customers, are those who prefer to travel

independently with a purpose of exploring different geographies and have interest in meeting the

local people and experience their cultures. This kind of travelling is typically seen in young

adults, who have budget constraints, less liabilities and have more time to spend in travelling

places unlike other travellers who have come in groups on recreational vacation. Here, by

Backpackers we mean that they carry luggage which are easy to be carried along while travelling

in the city. Such customers opt for low price accommodations. So to cater to their needs there are

budget hotels like Holiday Inn and Karama that offer rooms, lodge areas at very economical

tariffs in comparison to high star rated hotels like Atlantis and their business is also growing

with a good profitable margin with the increase in number of such travelers off late.

• Couples – Couples form a different segment all together since they have come on vacation to

spend some quality time with their partner or spouse. These are usually newly married couples

on their honeymoon, who will go for hotels that offer rooms with romantic décor and a cozy

environment to best suit their mood. So for those couples, Hotels sell off different packages

branded as honeymoon packages deals at special discounts which include premium room

services, luxury rooms, access to hotel other entertainment sites, city tours etc. These people

generally prefer to stay in luxury hotels like Armani’s.

• Families –Families ideally prefer less expensive hotels like Al Barsha and buy affordable

packages that offer additional sharing basis for their kids, inclusion of special services for kids,

like play area, entry to amusement parks etc.

• Business Travelers – Business travellers are considered to be major consumer of the industry

because of their frequent travelling on business visits. They occupy rooms and conference halls

for their business meetings and for such priorities, they tend to get more quality conscious and

are even ready to pay more for better room conditions that are fitted with technology services

like Wi-Fi, printers, and fax machines, Laptops / Desktops & other business related equipment’s

in order to work comfortably.

http://smallbusiness.chron.com/consumer-segments-hotel-industry-13764.html

Following is the country wise analysis of the occupants in the Dubai Hotel Industry:

Key intermediaries in Dubai hotel Industry

The distribution link of product or services can be directed straight away from the production of

a good to the end user or it can go through different intermediate channels to reach its customers.

In the context of Hotel industry, travelers can either directly contact the hotel department or go

through the intermediate process. The direct contact can be made through hotel websites, caller

service, and reception desk for reservations whereas indirect process links to travel agent or tour

operators, who are acting as intermediaries in this process.

The tours and travel companies have tie ups with hotels at good rates and in return hotels get

promotion and larger access to reach customers. These travel companies also work closely with

the airlines or other travel firms and they have specialized in acquiring domain knowledge. So

there is a reason for a customer to see a value addition in approaching these intermediaries as

they provide a complete tour package that combines accommodation, visa process, air transfers,

sightseeing etc. at lower prices.

http://www.hotelmule.com/management/html/14/n-2114.html

http://books.google.ae/books?

id=FQGBwm3uMU0C&pg=PA80&lpg=PA80&dq=buying+process+in+hotel+industry&source

=bl&ots=llUAmmNNBD&sig=PwA1nZKXBxp0hkzQs9kZcRXudDQ&hl=en&sa=X&ei=eE14

T9qRAcnWiALA4OiiDw&ved=0CHoQ6AEwCQ#v=onepage&q=buying%20process%20in

%20hotel%20industry&f=false

Consumer’s needs and expectations from hotels

Here the primary need of a customer is the quality of services rendered by a hotel unit. A

customer would look for the hotel brand name and its reputation in the market, quality of hotel

site, condition of rooms, hotel staff, and amenities provided. Other than that warm welcome upon

arrival, pleasant atmosphere and friendly decorum of hotel staff also generate positive vibes in a

guest’s mind.

Hotels should have a good communicating system for sharing information with clients. They

should have information help desk available through the day for the customer concerns and

maintain good interaction. Hotel staff should pay special attention to customer’s room

cleanliness, room interiors, bedding, digital/ technical equipment fittings etc. along with the

provision of other basic amenities. Housekeeping services should be responsive in checking up

customer concerns.

Hotel management should understand and address the situation that a customer has not only

come here for staying but to collect the delightful memories of his experiences, so to win a

customer’s loyalty and maintain a relation, hotel whole staff should make a concentrated effort to

satisfy customer needs with the quality of services and provide a worth to his package as client

perceives quality directly with the money.

http://www.dgt.uns.ac.rs/turizam/arhiva/vol1_2.pdf /

Major Competitors in Dubai hotel industry

Dubai’s high tourism rate has brought this industry into a very competitive shape and the

business is expanding at a fast pace. If we talk about Dubai’s top market players in this context,

then here are some branded establishments that are competing against each other in the category

of most luxurious hotels.

Grosvenor House Hotel Dubai

Atlantis Palm Jumeirah

Burj Al Arab

Armani Hotel

Madina Jumeirah

These hotels have set up a trend in the industry with its world’s finest class infrastructure and

facilities that surpass anybody’s expectations and imagination

Grosvenor House Hotel Dubai:

This has won accolades for the best hotel for consecutive years in 2010 and 2011 for the kind of

prominent landscape in the middle of the city business centre.  Without any doubt it takes the top

position with tits commendable services and level of quality one can expect. It satisfies the needs

of business travelers with its ultra tech modern facilities and of families with its leisure

entertainment sites. There are two Grosvenor towers that are similar looking; one is Grosvenor

House West Marina Beach and other one is newly constructed Grosvenor House, The Residence.

Both of them are of same height and consist of forty eight floors that lay down more than seven

hundred suites. It is a brand name in the industry because of its ultra-modern structure with

Arabic touch and has major attraction sites as emirates towers.

Atlantis Palm Jumeirah:

This is one of the novel high standards of construction on Palm Beach side and takes the lead in

the league. Located in a prime area of Jumeirah Palm Beach side, it has extra ordinary services to

offer leisure and comfort in its built of approximately 1,400 rooms and 166 luxury suites. This

also covers a portion of beaches in its private residency where guest can relax and experience the

scenic beauty of it. It has a unit of water world by the name of Atlantis Water Park that has

become the center of attraction for outside visitors and hotel guests for its thrilling water rides,

water rafts and a lovely dolphin amusement park that organizes dolphin shows, a swim with

dolphin and lot more.

Burj Al Arab: It is acclaimed as seven star hotel in its true sense because of its unbelievable

lavishing services apart from its unique and stylish infrastructure design that is in a shape of a

sail. It is supposedly the fourth tallest tower with twenty eight floors comprising of more than

two hundred suites for accommodation with a tariff per night is in the range of approximately

$1,000 to $27,000. It houses world’s best services in terms of entertainment, recreational

facilities, dining experience that one could get at maximum comfort. This hotel also offers a

place for high class business conferences and meetings in latest technological environment

support.

Armani Hotel:

Armani hotel was designed and developed by Giorgio Armani and it reflects the pure

magnificence and sophisticated comfort of armani’s style. It is nested in the world’s tallest

skyscraper Burj Khalifa and it offers sweeping glance of the city. It provides its guests an

atmosphere of calm tranquility where guests can retreat into a world of elegance. Armani hotel

features eight restaurants with a variety of available food options. It also offers extensive Armani

spa that includes personal treatments and sequential thermal bathing.

Hotel Armani gives access to Burk Khalifa’s observation deck and offers impressive view of

Dubai Fountain show. Also it is easily accessible within walking distance to one of the world’s

largest mall-Dubai Mall

Madina Jumeirah:

It is one of the most fascinating resorts in the world owned by Jumeirah group of hotels. It is

designed to resemble a traditional Arabian town and is one of the largest resorts in Dubai. In

midst of beaches, this hotel is the top choice for the famous celebrities. Booking a room here is

the biggest challenge especially for a non-famous personality as it seems to be booked round the

year by top celebrities. The resort comprises of forty world class restaurants. It offers music and

entertainment from all style and moods. It is located along the beachfront adjacent to Burj Al

Arab and Wild Wadi water park and gives complementary access to the water park.

https://www.google.ae/#hl=en&output=search&sclient=psy-

ab&q=These+are+some+of+the+best+known+hotels+that+not+only+provide+the+best+luxury+

accommodation+but+also+feature+world%E2%80%99s+best+services+and+facilities.

+These+hotels+take+you+into+a+dazzling+world+of+imagination+and+the+kind+of+architectu

re+they+have+used+is+really+impressive.&oq=&aq=&aqi=&aql=&gs_l=&pbx=1&bav=on.2,or

.r_gc.r_pw.r_qf.,cf.osb&fp=3251d92969fd66e4&biw=1280&bih=524

http://www.grapeshisha.com/where-to-stay/hotels-in-dubai.html

Successful or Unsuccessful times for Dubai Hotels:

With the increasing competition and market fluctuations, hotel industry is facing a tough phase

in terms of pricing. After the global slowdown of liquidity in cash, rates have been cut down to

meet the cutting edge competitive demands. High brands are taking more hit than budget hotels

in terms of revenues. Economy hotels, budget accommodations have sustained through the

slowdown period whereas five star hotels have noticed a greater dip in profits because of their

high costs.

For example- Holiday Inn express near Dubai airport, is an affordable accommodation with a

descent level of service. According to figures, though rates were gone down but still this hotel

registered an increase of ten percent in occupancy rate during 2011 when other high end hotels

like Emaar groups suffered heavy losses and on the similar lines some companies cancelled their

new projects.

http://www.hotelnewsnow.com/Articles.aspx/2361/Dubai-Worlds-default-could-hinder-

industrys-recovery

http://www.khaleejtimes.com/DisplayArticle.asp?xfile=data/business/2010/March/

business_March9.xml&section=business&col=

Product Differentiation initiatives by Dubai hotels:

In a highly competitive industry like Dubai where everybody is facing stiff neck to neck

competition, it has become imperative for the hoteliers to provide distinct flavor of the services

to the customers to win their loyalty and exceed the growing expectations. Therefore, product

differentiation is on priority for all the hotels segments mindsets.

High end hotels like Armani and Grosvenor differentiate from other competing brands by

offering wide range range of luxury services. Similarly, budget hotels should be doing to mark

distinction in their limited range of services. In this context, there should be a clear and unique

branding of hotel’s features which can connect customer’s mind strongly and there is no

confusion for a customer to understand before making a decision.

Hotels as a first step of brand marketing should identify their target customer pool and where do

they want to start from. With that keeping in mind, they should lay down their services aspect to

their target consumers. For a high class hotel like Burj Al Arab, branding comes with a style, so

they can provide extended leisure facilities along with the stay and delight the customers with the

comfort for which they have come for. To swipe a greater market share, pricing is very decisive

for a deeper market branding. If a customer is paying for a service then it should have that worth

and provide maximum value addition to a customer.

Then location is also a key to reach out to the larger customers. A prime location near city’s

business centre, or near airport or in the middle of city’s core proves to be on advantageous

position as it becomes convenient living and commuting throughout the city for the travelers.

For example Emirates tower is located in the heart of Dubai. Another important aspect for the

concrete branding of a hotel is to establish an interactive relationship with the customer by

delivering the hopes and promises they have committed. They can do it with providing additional

packages that sort of motivates the clients to come back again.

http://www.differentiateyourbusiness.co.uk/how-to-differentiate-a-small-hotel-or-bb

Market segmentation in Dubai hotel industry

A market consists of wide variety of potential targets that differ from each other in terms of

needs or behavior. So to study and identify the customer trends, we use market segmentation

technique that divides the large pool of heterogeneous customers into groups of potential target

customers which show similar needs and behavior and segmenting the customers’ results into

homogenous groups which are now relatively easy to study and compare within different groups.

It takes into account the following customer segments-.

Geography based– This means customers are clubbed based on similar geographical conditions

for example region, state/city, district and zip code.

Demographic based: Here, grouping is based on customer demographics information that is

gender, age, marital status, income, education qualification and profession.

Psychographic based: It includes groups that have similar social interests, hobbies, activities,

lifestyle, and personality.

Behavioral based: In this segment customers are classified on the basis of their product usage,

for example- frequent usage, occasional usage, loyalty to a brand, buying capacity and so on.

Given the large pool of customers, segmentation on the basis of above criteria enables Dubai

hotels to cater to the needs of a specific segment in a better way. It helps hotels to stand out

among the competition and create a specific market to target the customers. For example luxury

hotels like Atlantis and Burj Al Arab follow Demographics segmentation in major and classify

its customer’s base on the basis of their income and education so as to cater to the needs of the

high end segment.

Similarly, budget hotels like Karama apart from focusing on the low end segment classify its

customers on the basis of their behavior, loyalty and number of visits. Therefore, management

should analyze the different groups of potential customers and compare within different

segments to identify the gaps and then take proper measures to bridge the gaps

Changing demographics, social and cultural trends

These factors are variably linked to the hotel market from the outside environment. Hotel

industry analysts should consider these factors with the shifting trends of global economy,

Political movements, and technology up gradations that impact to the different customer

segments within the industry based on their demographics, social class, cultural & behavioral

characteristics.

Movements such as hike in crude oil barrels, privatization of airline industry, technological

reforms in IT have direct implications on a hotel business. For example the recent protests in

Middle East countries like Egypt, Libya and Bahrain had a positive impact on the Dubai hotel

industry since the violence in these countries hurt their tourism industry and people started

cancelling their trips to these countries. But this unrest did not spread to places like Dubai who

rather witnessed an increased in passenger traffic during this period. The tourism traffic moved

towards Dubai since Dubai is strategically located and well connected to the world. This increase

in traffic can clearly be correlated with the unrest in other countries.

Key Issues faced by the Dubai hotel industry:

Reduced foreign travelling:

Initially, because of the economic boom all over the world, the foreigners were flocking to Dubai

on and off but with the financial crisis hitting the entire western world, hotels are now been

deprived of that major share of clients from abroad especially from the western countries.

Pegging of AED against dollar:

Dubai currency has been pegging against dollar. As Europeans are facing significant pressure

due to the economic downturn, it has reduced the values of euro and pound sterling against the

US dollar. It has also reduced the purchasing power of the foreigners coming into Dubai from

Europe. Europeans are the maximum revenue generating segment for Dubai hotels but the

pegging effect has reduced that share.

Sustainability Issue:

The hospitality industry is growing at a rapid rate and is expected to grow even more due to

demand driven by tourism and this poses a challenge to hotel industries to pay attention to

sustainability issues. As costs rise and demand becomes sensitive to environmental and social

performance, sustainability becomes a critical issue. Hotels have to realize their responsibility

towards improving the outlook for the future while satisfying the increased demand and still

remaining attractive to investors.

Demand vs. supply mismatch:

Given the level of demand, there is definitely a large supply of hotel rooms in Dubai hotel

industry. Though the demand for hotels is picking up at a rapid rate, however the rate at which

this demand is picking up and the rate at which hotels are supplied to the industry does not

correlate. The number of hotels added to the industry every year is way above the demand levels

and which is why the occupancy rates are low.

Cost factor:

The average room rate in hotels is approximately three hundred U.S. dollars as per the report by

STR Gobal which is quite high. In fact Dubai has been ranked highest worldwide in terms of

average room rate. Even at the time of financial crisis, these rates tend to remain the same. This

has gradually eroded the revenues received by hotels since there are many other destinations for

the tourists in other parts of the world, which are comparatively much cheaper than Dubai.

Dubai sun

Dubai is located close to equator and is surrounded by sand and humidity. With Arabian Gulf on

one side and mountains on the other, it is difficult to escape the brutal heat. Dubai is mostly dead

during summer and residents purposely schedule travels during this period of time. Due to this

reason, occupancy rates are at its lowest during this period of time.

International Competition:

Globalization touches all aspects of hotel industry and hotels in Dubai are experiencing increased

international competition. Increasingly, all the resources including customers, employees,

services, products and sources of capital are competed for across the national boundaries.

Property slump:

Slump in the real estate also poses a great challenge to the hotel industry in general since a lot of

business in the hotel industry is driven by real estate and at the time of financial crisis it snatched

all the glitter out of hotels in Dubai.

Project financing

Project financing also poses a great challenge to the industry. Raising loans for new projects through

traditional sources of revenue have become difficult. Due to the high risk involved in the hotel

investment, banks have adopted strict lending standards while issuing loans. For example interest rates for

loans have been increased recently. All this create a challenge for the Dubai hotel industry.

http://www.hotelsdubaiblog.com/dubai-hotels-the-challenges-ahead/

http://www.arabianbusiness.com/property-slump-biggest-challenge-for-dubai-hotels-9493.html