The strong dollar is squeezing the Dubai hotel sector with room rates and occupancy levels dipping again last month.
The completion of new hotels in the emirate is adding to the pressure on room rates as tourists seek cheaper destinations.
Occupancy levels decreased by 2.2 per cent to 85.7 per cent in March, while the average daily rate touched Dh978.69, a decline of 6.1 per cent year-on- year, according to consultancy STR Global.
The muted performance pulled down a key measure of the hotels’ profitability – revenue per available room – by 8.1 per cent to Dh838.69.
The strength of the US dollar, to which the UAE dirham is pegged, is hitting inbound tourists from the euro zone, while the collapse of the rouble has also dramatically reduced the number of visitors from Russia.
Increasingly, European travellers are seeking out cheaper alternatives such as Egypt and Turkey, according to according to Rashid Aboobacker, a senior consultant for TRI Consulting.
One euro can buy about Dh4 today compared to about Dh5 a year ago.
The Dubai economy has also slowed down because of lower oil prices and the subdued real estate market. Hilton’s Dubai properties in the UAE have reported a slowdown in the number of Russian travellers, while acknowledging it remains important for its luxury brands such as Waldorf Astoria as well as mid-market brands such as Hilton Garden Inn, two of which are expected to open in the fourth quarter in Dubai.
“We remain cautiously optimistic for the year ahead, especially given increasing levels of leisure and business travel to Dubai from countries such as the UK, Germany and the US – as well as China, an emerging market,” said Christian Grage, the vice president of operations for Arabian Peninsula at Hilton Worldwide.
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The Melbourne Mercer Global Pension Index
The Melbourne Mercer Global Pension Index
Mazen Abukhater, principal and actuary at global consultancy Mercer, Middle East, says the company’s Melbourne Mercer Global Pension Index - which benchmarks 34 pension schemes across the globe to assess their adequacy, sustainability and integrity - included Saudi Arabia for the first time this year to offer a glimpse into the region.
The index highlighted fundamental issues for all 34 countries, such as a rapid ageing population and a low growth / low interest environment putting pressure on expected returns. It also highlighted the increasing popularity around the world of defined contribution schemes.
“Average life expectancy has been increasing by about three years every 10 years. Someone born in 1947 is expected to live until 85 whereas someone born in 2007 is expected to live to 103,” Mr Abukhater told the Mena Pensions Conference.
“Are our systems equipped to handle these kind of life expectancies in the future? If so many people retire at 60, they are going to be in retirement for 43 years – so we need to adapt our retirement age to our changing life expectancy.”
Saudi Arabia came in the middle of Mercer’s ranking with a score of 58.9. The report said the country's index could be raised by improving the minimum level of support for the poorest aged individuals and increasing the labour force participation rate at older ages as life expectancies rise.
Mr Abukhater said the challenges of an ageing population, increased life expectancy and some individuals relying solely on their government for financial support in their retirement years will put the system under strain.
“To relieve that pressure, governments need to consider whether it is time to switch to a defined contribution scheme so that individuals can supplement their own future with the help of government support,” he said.
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