These days, UAE hotels will even allow rooms as ‘offices’ to pick up bookings

Dubai: More hotels in the UAE are now doubling up as offices, with operators quick to spot opportunities by leasing space short-term. This, hotels say, should help them stay afloat until guest-related bookings pick up again.

These rooms double as private office spaces for professionals who want a break after working from home for weeks at a stretch. Tea, coffee, water and wi-fi are typically included in the room charges.

Local hotels are offering some hugely competitive rates on these “offices”. An office-room pass at Rove Dubai Marina and Rove Healthcare City costs Dh79 a day.

Rove Hotels partnered with Letswork, a workspace provider, to offer the day pass between 6am and 10pm. (The day pass can be purchased through the Letswork app.)

Taj Dubai has also introduced packages where guests can check in for a room and use it as a workspace. An office with a view package comes to Dh200 for three hours (single occupancy) and Dh350 for six hours.

But once the authorities give the go-ahead for offices to resume normal operations, demand for alternate spaces in hotel rooms will wind down. That’s why hotel operators will need to come up with their Plan Bs and Cs to see through the next few months, until normal service gets entrenched.

Think up options

Faced with steep falls in daily room rates, occupancy levels and revenues, hotels have resorted to mass salary cuts, layoffs, forced leaves and full/partial closure of hotels in response to COVID-19. As per a survey conducted by Colliers International in April, 88 per cent of hotel owners chose to reduce staff and/or salaries while 79 per cent chose a full or partial closure of their properties.

On the other hand, about 29 per cent repurposed their property to accommodate quarantine patients while only 4 per cent chose to change their property to residential use.

“Our current occupancy of mainly corporate, long-stay guests is between 20-30 per cent,” said Damir Kartal, General Manager, Grand Excelsior Hotel, Al Barsha, a four-star property. “We have reduced the number of staff proportionate to the number of guests and volume of business.

We have reduced the number of staff proportionate to the number of guests and volume of business

Damir Kartal, General Manager, Grand Excelsior Hotel, Al Barsha

“We only have essential staff such as those in security, reception, housekeeping, food and beverage, HR and finance working at the moment.”

Hardest hit

Dubai’s hospitality market took a direct hit from the COVID-19, as a result of flight suspension and cancelled bookings. Average occupancy in April was 23.6 per cent, a reduction of 71 per cent compared to April 2019 while March occupancy was 37.5 per cent, a drop of 54.7 per cent compared to the corresponding time last year, says STR, a data and analytics firm. Hotel occupancy in January, by comparison, was a healthy 84.6 per cent and 77.1 per cent in February.

An extension on Municipality tax relief

Although authorities reduced the Municipality tax on hotels from 7 per cent to 3.5 per cent for three months up to June 15, Dubai’s hotel operators are hoping for an extension for as long as the travel slump persists. Plus, guests also have to pay a tourism dirham fee of Dh20 a night, 5 per cent VAT and 10 per cent service charge.

“The magnitude of losses for hotels is high – a 3.5 per cent reduction in Municipality tax does nothing when we have lost Dh3 million in revenues,” said J.S. Anand, CEO of LEVA Hotels & Resorts, which operates the LEVA Mazaya Centre Hotel in Dubai.

The way the industry is going right now in terms of loss of business, we need support until the end of 2020 to recover

J.S. Anand, CEO of LEVA Hotels & Resorts

“There is no unified body of the industry that looks into any of these issues. The way the industry is going right now in terms of loss of business, we need support until the end of 2020 to recover.”

Ranjit Phillipose, Area Director – Middle East and General Manager, Taj Dubai, concurs: “The reduction in Municipality tax for three months was a great initiative to provide relief in this difficult time. We trust that the authorities will revisit this and come up with the best approach to support the hospitality industry.”

All hopes on “staycations”

Local hotels managed to generate some bookings from residents wanting to spend their Eid holidays somewhere other than their homes. This will be the strategy operators will follow for the summer break as well.

They need to until overseas guests come calling. A majority of hotels are offering highly competitive offers. Their efforts will have received a boost with the authorities confirming on Monday (May 25) resumption of facilities such as gyms.

We anticipate some level of demand from residents who have been cooped up at home and are looking for a change of scenery

Ranjit Phillipose, Area Director – Middle East and General Manager, Taj Dubai

“The UAE government recently announced that people are free to travel between the Emirates, so we anticipate some level of demand from residents who have been cooped up at home and are looking for a change of scenery,” said Phillipose. “Enquiries have started trickling in and some guests have even just walked in looking for a short stay.”

Rate dilution

While hotels reduced room rates in the face of subdued demand, additional supply was another factor weighing on rates. The average daily rate (ADR) at Dubai hotels was Dh266.8 in April, down 58.8 per cent from last year. Revenue per available room (RevPar) was a measly Dh63 in April, an 88 per cent year-on-year reduction, according to STR.

As of April, there were approximately 126,000 hospitality keys in Dubai, according to Colliers International. An additional 24,000 keys are to enter the market by year-end – however, the pandemic is expected to reduce this number.

Some of the high-profile openings expected this year include The Royal Atlantis Resorts and Residences and the Palm Tower Residences.

“Considering the current market conditions, rates went down by 30 to 50 per cent,” said Wael El Behi, General Manager of Ramada by Wyndham Jumeirah Hotel. “From July onwards, hopefully the international travel market will start moving.”

Until then there is always the staycation guest or the one booking an “office room”.