Market 'correction' means better prices

Even the chaos on the roads around the Dubai International Convention and Exhibition Centre could not dampen the relentless optimism that pervaded the Arabian Travel Market (ATM) this week. It took participants more than an hour to get from the show to the nearby Address Hotel for the opening party, which was so oversubscribed that by mid-evening anxious doormen could be heard asking that entry be declined in the interest of safety - but still, they kept smiling. European and American journalists, coming from colder economic climes, kept asking each other if this was for real, or whether the local travel industry was simply in denial. Certainly, there were a few gaps in the hall where a handful of exhibitors had pulled out, and some stand holders - away from the buzz of the Middle East halls - complained that while last year they had not even had time to visit the bathroom this year they had nothing to do. Yet in the days leading up to the show my inbox had bulged with ever more insistent e-mails requesting attention from the 2,100 exhibitors fighting to broadcast their story. In fact, the real news is that it's you and I who should be smiling. The mantra, repeated in countless press conferences across companies and continents at this year's ATM, was: "we are well positioned for the recovery". Which, when translated, means that to keep the show on the road, hotel room prices have had to come down dramatically and are continuing to fall. It's become a buyer's market and, in order to survive, hotels all over the world are adjusting - or "correcting" - their prices. As a result, profitability has suffered far more than occupancy levels. Patrick Antaki, the general manager of Le Méridien Al Aqah Beach Resort, Fujairah, where they have also had an algal bloom known as a red tide to contend with, says: "Our prices are 50 per cent less than in Dubai and 35 to 40 per cent less than this time last year. Because of the global economic downturn, we have adjusted our rates to give better value for money. The result is that we had 88 per cent occupancy in February and 90 per cent in March. Our profitability has been affected but for the guest the experience is the same, but costs less." It is a policy that other hotels will have to follow if they have not already done so. Saeed bin Saeed Al Sharqi, the chairman of the Fujairah Tourism Bureau, said that the emirate has suffered a 40 per cent loss of business, but at least the red tide has disappeared. "I swam in the sea this morning," he said. "And it was lovely." Nigel Pocklington, the managing director of Hotels.com, which launched its Arabic website at the show, confirms the story. "We are processing as many, if not more, transactions, but hotels have cut their prices so income is down. "It's good news for the consumer. The average price of a hotel room worldwide now is at the same level as in 2004. It's a tough environment but there are pockets of demand and the Middle East is one of them. "One of the reasons that the travel industry is less severely hit than others is that it has flexibility in its pricing. The other factor is... [that] while people will give up eating out and other luxuries, trips away are seen to be essential. People will continue to travel and to stay at hotels and they are finding that they can trade up. The gap between five- and four-star [hotels] is disappearing. They can stay at a five star on the same budget as five years ago." Many are predicting that the new, lower prices will not inflate again any time soon. Devesh Chatuvedi, the director general of India's ministry of tourism, said that hotels in India had previously been too expensive. "It is right that prices have come down and it is our belief they will stay down. You can get a five-star hotel room for between US$120 and $140 now, and if you bargain you can even get it for $110." Prices at hotels in Abu Dhabi and Dubai have not dropped to these levels - the two cities rank in the top three most expensive in the world according to a Hotels.com survey based on bookings made through its website rather than hotel rack rates - but, in Dubai, prices are coming down gradually and the show's organisers also talked about a market correction. Mark Walsh, the director of Reed Travel Exhibitions, referred to this week's ATM as a "watershed moment" particularly for the Middle East market. There were more reasons to be cheerful from James Hogan, the chief executive of Etihad Airways. Unveiling the new $70 million (Dh257m) first-class suites complete with sliding doors for complete privacy - in fact, they looked remarkably similar to the first-class suite on Emirates' stand - Hogan said there had been, and would continue to be, heavy discounting in economy class. "I have worked in the industry since 1975 and have seen lots of crises - Sars, war, the tsunami, fuel price changes - and it's all about confidence. It's our role to stimulate business; we have to manage cuts, not panic, and be more tactical." Travellers can expect to see cheap fares over the summer, and in the autumn, the airline will launch a campaign aimed at enticing economy-class passengers. "Behaviour is different now to what it used to be; people will still travel but they are wiser about how they spend their dollars. There will be more people taking time out, taking gap years, and we have to cater for those needs," Hogan said. To bolster confidence, the show was used to announce several new projects highlighting both investment in the region and local companies investing abroad. Anantara's latest resort, Qasr al Sarab, will open later this year in Liwa; Sofitel confirmed that its new hotel on The Walk at Jumeirah Beach, Dubai, will open this summer; Qatar Airways announced that six new routes will take off over the next 10 months; Raffles announced that it would be managing a new hotel in the Holy city of Mecca. All of these have been long in the planning stages and there was a noticeable absence of brand new, headline-grabbing projects. For those, I assume, we will have to wait a few years - or at least until the 20th anniversary of the ATM next year. sryan@thenational.ae