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Monday, April 19, 2021

Qatar hotels to drop prices in 2016, but still make huge profits

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Shangri-La Hotel
Shangri-La Hotel

Hotels in Qatar are expected to lower the prices of their rooms for the fourth year in a row amid increased competition and reduced demand from corporate customers, experts have said.

However, analysts said the country remains the “envy of everybody else on the planet” in terms of the large profit margin its hotel market enjoys.

Filippo Sona, the head of hotels at real estate firm Colliers International, told a conference in Doha yesterday that daily rates are forecast to fall 3 percent this year to reach an average of US$191 (QR696) by the end of 2016.

That may not sound like much, but speakers at yesterday’s Arabian Hotel Investment Conference in Doha noted that visitors from outside the region, especially those arriving on business, are becoming more price conscious.

Travellers also face a multiplying number of hotel options, with Colliers forecasting that the country’s supply of rooms is expected to jump 25 percent this year, to reach 19,726.

More competition

Several new properties have already opened their doors in recent months, including the Westin. Others – such as the Mandarin Oriental and Park Hyatt in Msheireb Downtown Doha – are slated to open later this year.

The atrium inside the Westin Doha.
The atrium inside the Westin Doha.

The race to construct new hotels and serviced apartments ahead of the 2022 World Cup has led many industry observers to suggest that Qatar will have a large oversupply of hotel rooms in the years before and directly after the football tournament.

However, conference speakers said that while there may be some short-term challenges, hospitality firms are betting on Qatar’s long-term success as a business and leisure destination.

“We’re not building specifically for the World Cup,” said speaker Christopher Knable, chief operating officer of Katara Hospitality, which owns Qatar’s Ritz-Carlton, the Sheraton Doha and Sharq Village and Spa. “It’s not about one specific event. It’s about building a diversified and attractive tourism destination.”

Knable and others pointed to Qatar’s success in attracting other international sports tournaments, as well as its cultural assets such as the Museum of Islamic Art. Sports and culture are both key parts of the Qatar Tourism Authority’s strategy to attract more visitors here.

MIA
MIA

So far, Qatar’s hoteliers are continuing to fill their rooms. Colliers predicts that the country will post a 71 percent occupancy rate in 2016, roughly the same as last year, despite the hefty increase in supply.

And despite some signs of a softening market, hotel owners are still booking healthy profits.

In 2014, Qatar hotels made an average gross operating profit of $150 (QR546) per occupied room, a figure that likely dropped off slightly last year but remained healthy, said Philip Wooller, area director at hotel data firm STR Global.

(The company’s data differs slightly from Colliers’ figures and shows average daily rates actually increased 4.1 percent last year.)

Despite the challenges of new supply and the unrest in the region, hotels in key markets across the Middle East are performing strongly, Wooller said. It Qatar, margins averaged 43 percent in 2014, although he noted that high construction costs mean hotel owners have typically incurred large capital expenses.

“(Qatar is) a fabulous hotel market and the envy of everybody else on the planet,” Wooller told Doha News.

Sharpening service

Sona estimated that business travelers make up three out of every five hotel guests in Qatar.

While the nation’s hospitality sector may soften as these visitors trim their budgets and become more price-conscious, several conference speakers said they do not expect local hotels to dramatically slash their rates even if the new supply of rooms outstrips growth in demand.

Wooller said lower prices are unlikely to stimulate more tourist visits on their own, especially when wealthy guests from Saudi Arabia and within Qatar remain willing to book rooms at the current rates.

The pool at the Westin.
The pool at the Westin.

Instead of engaging in a price war, hotels are expected to undertake renovations and increase their services to differentiate themselves and capture market share, several speakers said.

Sona said there are several opportunities on the service front, particularly in the leisure market. He referred to Colliers’ guest experience index, which analyzes online hotel reviews to find both the top brands as well as compare perceptions of a hotel’s quality across different consumer segments.

Reviewers who identify themselves as business travelers to Qatar are generally more satisfied than those who visit as a couple or a family, Sona said.

A hotel looking to set itself apart from competitors by winning over families could, for example, address the issue of boisterous children running amok in the lobby by stationing an employee to entertain younger guests while their parents check in, Sona suggested as an example.

For illustrative purposes only.
For illustrative purposes only.

He also recounted a personal experience at a Qatar hotel (that he declined to identify) in which the concierge welcomed him by name as he entered the lobby after exiting a taxi.

Perplexed, he said he tracked down the hotel’s general manager, who shared his secret.
The hotel offers a free meal to any taxi driver that texts the name of their passenger to the hotel general manager while en route to the hotel.

“This is an amazing, creative way of enhancing the guest experience. That hotel won my absolute vote,” Sona said.

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