Russian tourists head to more affordable Sharm El Sheikh instead of Dubai

With Egypt’s Red Sea resorts offering discounted packages and all-inclusive deals, more Russians were headed to the region.

Russian supporters cheer for their team during the Samsung Beach Soccer Intercontinental Cup 2013 in Dubai. Antonie Robertson / The National

Dubai hotels have started to feel the pinch from the slowdown in Russian and European visitors as discounted deals in resorts like Sharm El Sheikh attract the more price-conscious tourists.

The first half of the year is expected to involve a subdued hotel performance, with occupancy expected in the 75 to 80 per cent range, according to analysts.

That would be down from 84 per cent occupancy during the same period last year, when the average nightly rate was US$290.

With Egypt’s Red Sea resorts offering discounted packages and all-inclusive deals, more Russians, particularly from the middle class, were headed to that region, said Rashid Aboobacker, a senior consultant with TRI Hospitality Consultancy, Middle East.

“Russian tourists could be reconsidering their trips to more expensive destinations, such as Dubai, and travelling to more value-driven destinations like Sharm [El Sheikh],” he said.

The rouble lost about 40 per cent against the dollar last year, hurt by the falling oil price and by western sanctions over military action in Ukraine. The euro has also been falling against the dollar since May.

“The weak euro and rouble have impacted some amount of travel expected from these countries and has even seen some Russian travellers returning to their home country prior to celebrating the new year in Dubai,” said Yousef Wahbah, the head of transaction for real estate in the Middle East and North Africa region at EY.

In November, Dubai hotel occupancy rates declined by 1.1 percentage points to 86.7 per cent, and average room rates fell 5.5 per cent year-on-year to $392.37, according to HotStats data compiled by TRI Consulting.

Revenue per available room also declined by 6.6 per cent to $340.06.

“The current decline [in Dubai] is considered to be a combination of multiple factors, including the diversion of tourist traffic to Egypt and Lebanon, the decline in the Russian market, and the growth in hotel room supply,” said Mr Aboobacker.

The number of travellers from Russia and CIS countries passing through Dubai International Airport fell by 18 per cent in November. Russian visitors made up 3.7 per cent of Dubai's tourist arrivals in 2013.

“The decline appears to be primarily in the middle income segment, and the luxury hotel market is considered less affected,” Mr Aboobacker said.

“Nevertheless, a significant drop in these numbers will have an impact on the market, particularly during a period when the supply is growing and competition is intensifying.”

About 6,000 hotel rooms and apartments are expected to open this year, he said.

Some hoteliers, however, say that the weak rouble is also hurting Sharm El Sheikh.

“Clientele for the two destinations are different,” said Marc Descrozaille, the regional director at Carlson Rezidor Hotel Group for the UAE, Egypt, Jordan and Oman. “It’s not the end of the world in Dubai, but it’s affecting us in Sharm El Sheikh, Sharjah and Fujairah.”

While Dubai beach hotels that attract Russian tourists have an average price of $250 a night, those in the Red Sea resort area are in the range of $30 to $40, he said.

The Russian tourists are also staying closer to home in Black Sea resorts such as Sochi.

The Egyptian Red Sea resort reported a 46.3 per cent increase in room rates to US$47.72 and a 2 per cent increase in occupancy to 61.8 per cent in November year-on-year. The revenue per available room grew by 51.3 per cent to $29.51.

Follow The National's Business section on Twitter