“The customer loyalty developed through strong branding is valuable to any company, and as the hotel business becomes more competitive in the economic crisis, it is vital.”
This is what I’m talking about and what is happening in Middle East hotel industry. What I estimate will happen in UAE when it comes to hotel industry the following 1-2 years is:
We can already see an increase in mid range and budget hotels. IBIS, Citymax Hotels and Centro (Rotana’s new brand). The budget hotels often change their rates according to demand which gives a more accurate and reliable rack rate for customers. Another trend is the change in people’s perception when it comes to budget hotels. 5-8 years back, mid range hotels meant Formula 1 and poor IBIS hotels in German outskirts. Today, we see standards similar to 4 and 5-star hotels but with cutbacks on staff, services, reception opening hours and more self-service. There’s a hotel in Malmö, Sweden, where you do everything yourself; check-in, collecting keys and check-out. It’s impressive and excellent if you don’t fancy being looked after.
Back to the trends coming years. As quality of above mentioned hotels increase, people are less willing to pay high rack rates for 4 and 5 stars. The 4 stars are the real suffers here as they are somewhere in the middle. You expect service and facilities as a 5 star but prices like a 3 star which makes it extremely difficult to meet or exceed the guest’s expectations. I think there’ll be no 4 star hotels left within 5 years. It’s simply out of fashion.
Fewer people can afford to travel and especially to Dubai. The rich and famous already had their share of golden Dubai and are now looking for new adventures to conquer. So, are the new tourists entering Dubai willing to pay previous rates? I don’t think so. Prices will have to drop which means that quality drops. And as new tourist types visiting us, they have higher expectations than previous types. It sound contradictive but the guests coming during low season, paying lower rates are the ones who complain the most because their expectations are higher.
New tourists mean charter and with this, other issues follow such as higher crime rate. But also new business. I believe we’ll see a downturn for 5 star hotels and only a few of them will stay on top. The competition to remain luxury and on top 5 will be tough. You have to deliver and differentiation will take you far. But this, I will take about another day. Now it’s business time!