Dubai’s hotel sector will require significant change to be successful: MD, Global Hospitality, Drees & Sommer

Published: 24 November 2019 - 7:45 a.m.
For the hospitality industry to be successful in the coming decade, the hotel sector will “require significant changes” said , MD, Global Hospitality, Drees & Sommer.

According to him, hotel business models, brands and physical assets will all require significant changes over the next 10 years.

Driven by the evolving economy, increased hotel supply and the consolidation of the average room rate witnessed in the Dubai market, hotel owners and operators will need to shift from a revenue-driven strategy to a cost-driven strategy.

Sona, said: “It is time for hoteliers to reposition and reinvent themselves. The main issues surround the business model. For example, staff accommodation, currently provided by hotel owners in Dubai, is a massive cost that is neither sustainable nor necessary. It will become obsolete. This is for two reasons.

“Firstly, Dubai’s residential market is stable but expanding, and there will be units coming online that hotel employees can afford to rent. Secondly, the trend towards outsourcing hotel services, from security to housekeeping, is growing and coupled with developments in technology that will make hotel operations more efficient, hotels will require smaller workforces in the future,” he added.

“However, such dramatic change to well-established business models requires a huge shift in mindset and this will take time. It will be a gradual repositioning, but one that needs to start now and take place within the next 10 years,” explained Sona.

When it comes to brands and physical assets, Sona said hotels that were built prior to 2010 will need to be repositioned in order to compete with the new supply coming online. According to STR’s latest data, there are 427 hotels accounting for 123,742 rooms in construction in the Middle East, with 54,438 (31.8%) of these rooms in the UAE.

“The repositioning of physical assets will require more than a refurbishment,” said Sona. “The consolidation of average room rate that we are seeing right now is here to stay. Dubai is a spectacular destination, with visitor numbers increasing year-on-year, but US$180-200 is going to be the new average five-star room rate and properties need to be designed accordingly. Potentially, this means hotels will need to have room sizes equivalent to those in other key global markets, such as London, New York and Amsterdam. Will the Dubai hotel of the future have 45sq m rooms? No; the investment required will be too high per square foot, which doesn’t make sense in today’s economy. Hotel brands will need to be onboard with this change too, and ensure their product meets the needs of the future market dynamics.”

Sona added that the profile of Dubai’s hotel general managers will also change over time.
“Hotel owners need to be able to rely on seasoned operators who are used to working in city hotels in markets where every dollar counts. General managers need to understand the cost structure of their operations very well.”

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