Analysis of the Hotel industry in UAE

Introduction

The service sector to be precise is bound to expand further from the current standing due to huge global economic growth in the areas of travelling, hospitality, hotels and recreational services that defines the hotel industry. It is being observed that economic activities within the realms of the hotel industry also and the investment made in that regard is huge and booming. These factors foster the growth element of the hospitality industry. Above all, the increasing numbers of global travelers in the backdrop of tourism and its booming growth poised the way for the hospitality industry to benefit tremendously. The economic aspects and its consideration in that regard as far as activities encompassing the hospitality industry thus are flawless and immeasurable as far and growth factor is concerned and the economic aspects in that regard. But often we wonder as to what defines the hotel industry or let say, hospitality industry for that matter? In general hotel industry is a broad category and includes the service industry at large covering the category of lodging, restaurant, recreation and many more.

The hospitality industry on a global scale is a huge. There is high instance of economic activities going on within the global hospitality industry. Due to the growth in tourism, recreational services and lodging as well as food chains and increasing number of restaurants, the global domain of hospitality industry present a huge economic avenue for all kinds of opportunities, be it investment, financing or the factor which also drives the construction sector in the economy of the world. Above all, employment opportunities also are huge in the hotel industry on a global scale. (Economy-Watch) There is no doubt in that regard, since the hotel industry encompasses all features of the service sector.

Summing it all up and when we focus our attention to the hotel/hospitality industry in UAE also we feel that there are many interesting details to research about, especially the growth component of UAE hospitality industry in the current schemes of things.

Literature Review

First and foremost it should be understood that the very idea of hotel industry in general is a playground of huge economic activities. As we can observe, international industry presents a refined form of globalization and its influence in almost all sector and industries. The significant part is that globalization has opened up an avenue and numerous opportunities for hotel industry to reap the benefit from.

Global Hospitality Industry

Hospitality to be correct is much broader in scope. Some people do have a misplaced understanding as to what is hospitality industry.  The general perception of hospitality means the realms of hotel and restaurant. This is not wrong or incorrect to be precise, however, hospitality industry and its scope is broader and includes all features of entertainment and other aspects that amount towards serving guest and reception of visitors with liberty and good will. (Clayton W. Barrows, 2008 , p. 4) According to scholars and observers, they are of the opinion that the global hospitality industry is bound for a major boom and growth, due to increase internationalization of businesses and the worldwide presence of variety of services in the backdrop of globalization and its impact. An economic aspect that covers the range of activities within the hotel industry also is garnering steam. (Yu, 1999 , p. 3) In the current scheme of things it is said by experts that the global hospitality industry is on a growth path. Demands in the industry as far as service components encompassing hotel industry also is huge, which further boost the growth element to the point that meeting the demand seems to pose many issue when viewed from a business perspective and as far as operation goes. (Ernst&Young, 2011)

Nonetheless, it also should be understood that ‘hospitality is the very important component of the service industry in any of the country national economy.” (Yu, 1999 , p. 4) Speaking of the hotel industry, it should also be understood that the components which feature the hotel industry can be classified and divided into two main segments, namely (i) Entertainment area (ii) Accommodation and Lodging. (Economy-Watch)

Entertainment Areas: in the Entertainment Area, the hospitality services includes, clubs, bars, restaurants, casinos, and other forms of entertainment such as event planning and the likes, which are some example mentioned herein. (Economy-Watch)

Accommodation and Lodging: On a larger note though, Accommodation and Lodging area of the hotel industry includes houses for rent, hotel accommodation, resorts, serviced apartments and also extend its range to motels, which are a factor of attraction for traveler due to the cost factor and comfy accommodation on a first come, first serve basis. (Economy-Watch)

Apart from these and within the components of the hotel industry in the global scale, the very object of tourism also finds a pale of consideration. The structure of tourism and its components to a great extent defines the very object of hospitality industry. What is all about tourism and is feature can be measured within the realms of its components that includes providing tourist with comfy accommodation when it comes to their stay be it hotel, motel, lodges, guest houses furnished apartments or any other hospitality services. (Andrews, 2007 , p. 30) For this very reason we see as to why the tourism sector at most instance are in tie up with major hotels and accommodation providers and also with tour and traveler providers and thus boosting the growth of global tourism. Above all, it should not be forgotten that the hospitality industry is a huge employer, when compared and contrasted in context of the industry at large. Employment opportunities in the backdrop of booming global tourism and increasing and mushrooming international business provide a huge avenue for fresh graduate and those who are specially trained in the hospitality management aspects.

Hospitality Industry in UAE

According to reports, it states that the hotel industry in UAE and in particular to its Trucial state Dubai is very competitive. Dubai and UAE in particular defines the landmark for all kinds’ of luxuries. Hence, when it comes to hotel industry, it is not surprising to see that UAE in that regard boast of a huge avenue and booming scenario of Hotel industry. One example of it can be looked in respect of the Dubai Marina Hotel and Resorts that are a delight global travelers and frequent traveler who is in search of luxury. (Boermeester, p. 52)

To understand the very component encompassing the hospitality industry in UAE and in particular in Dubai, we feel that observing the development projects in the tourism industry and increasing construction for tourism attraction in recent time can be effective. One example to list in that regard can be looked in respect of the Palm Spring Island, and the Burj Al Arab Hotel that was opened and operated since 2009, and boast itself with a seven star class, and which we proclaims to one amongst the luxurious hotel on the global scale. (Ahmed Hassanien, 2010 , p. 14)

Objectives, Scope and coverage

This report and its study overall is focused and limited to the ‘hotel industry in general’ and the discussion in that regard which also covers the hotel industry in UAE in the last 2 years, starting from 2009 to present. We feel that it is also prudent to define the component of this report overall, that is to say the scope and its coverage. The overall discussion relates:

To define, extrapolate and examine the features of what defines the hotel industry on a global scale.

An extension to list all the viable and recent data related the growth and booming of the hotel industry in UAE, with its concentration in Dubai and Abu Dhabi, which is central to the discussion of this work.

In order to reach to this conclusion and the analysis required herein for the basis of this report and the subject matter requirement, we feel that reliable source and data retrieved from the hotel industry would be viable enough, besides other available literature and information that can be retrieved online. Besides information related to the industry in general and that which is related to the hotel industry in UAE also would be helpful enough to assist the completion of this work and the attempt made in that regard.

The main aim and objective of this work is to reflect its discussion and analysis on the hotel industry from an economic perspective. Thus, it is only natural that information to be used herein is directly linked to the hotel industry in general and that which gives us an informative points about the hotel industry in UAE in the current scheme of things. For that reason a brief economic analysis as to the growth factor of the hotel industry in UAE and its comparison with the global hotel industry is also a necessity we felt, which will be covered in this report through a literature review and successive, discussion and analysis, which defines the overall objective of this work in order to reach a conclusive conclusion. 

Hypothesis/Assumption of the Report

We assume that identifying the main issues to be discussed related to the subject matter ‘hotel industry in UAE’ is also helpful, which the following paragraph relates to.

• What defines the ‘Hotel Industry’ in general? Besides, what defines the components of hotel industry?
• It is assumed that the hotel industry is one of the fastest growing industries, How far this statement stands true? If, so what are the scopes for its growth for the present and future segment of the industry in general, given the current booming of hotel industry on the global scale?
• What are the attractive features of UAE hotel industry? How far UAE hotel industry has contributed to the growth element of global hospitality industry at large?
• What employment opportunities do the hotel industry offers, given that service sector is assumed to be the factor that drive the hospitality industry?

Considering these assumptions identified above, it should be further clarified that this work and the overall attempts in parts and full thereof is to trace and examine the features of global hotel industry, with its concentration in UAE hotel industry.

Methodology and Data

For the purpose of this work, the methodology used herein is divided into the primary and secondary resources.

Primary Resources: to be correct, there have been very least instance where the primary resources are used in this report. It won’t be wrong to say that the primary resource in all aspects is focused within the data, or economic indicator to the growth element of UAE hotel industry that classifies between Abu Dhabi and Dubai which were accessed online and a helpful companion to trace the real economic indicator.

Secondary Resources: Inclusive in this report, is the secondary resource being used, namely news and economic reports that is specifically related to UAE and its hotel industry covering a period of 2 years from 2009 till date. Besides, available literature that is related to the hotel industry and its discussion also have been used extensively in order to structure the report and its discussion overall.

The combination of the primary and secondary methodology employed herein has been helpful enough for this work and the attempt made in that regard. However, primary resources and its availability posed many limitations. Yet, the economic report has been feasible to close that gap, which helped in completing the report successfully.

Data Tabulation: The Economic Aspects of Hotel Industry in UAE

From an economic point of identifying the discussion of the hospitality industry and that which is related to UAE, we see that its growth is booming. There are all kinds of hospitality services in UAE, ranging from budget hotels, 2, 3, 5 and 7 Stars hotel. The latest report available with AmeInfo.com, an online news portal, it highlights that increase of revenue from the hotel industry touched the 10% mark till date counting from the start for the financial year 2011. This research was carried out by Deloitte & Touch, a global firm with its specialization in global economic research and risk management. (AmeInfo, 2011) This is one of the latest reports. Despite the gloom and decline in hotel industry revenue in the early part of 2009, UAE today is subject to benefit hugely from the rise in global travelling and tourism attraction in the country. News report available with UAE-Interact also states that Abu Dhabi alone have achieved of hotel guest in the first quarter of 2011 to the tune of 10%, a huge jump from the global slump in 2009-2010. (UAE-Interact, 2011)

The following data analysis would be helpful to understand the Hotel Industry in UAE, which is classified between Abu Dhabi, and Dubai growth projection for the financial year 2011.

Data Analysis: Abu Dhabi Hotel

The number of guest and visitors who lodge in at most of the hotels in Abu Dhabi and its figures is as follows.

SOURCE:(UAEInteract.com)

Data Analysis: Dubai Hotel

When it comes to Dubai hotel though, the following is the data.

SOURCE: (UAEInteract.com)

In Dubai, there are all kinds of flagship hotels, starting with 2, 3, 5 and 7 starts hotel and resorts. The rise in percentage of room occupancy and revenue by a tune of 2.6% for the financial years 2011 is a positive thing we feel. Such increase says analyst is subject to the rise in global travelers and also the tourism boom just after the global economic downturn. (UAEInteract, 2011)

Analysis of Results

From the above data tabulation and when considering the hotel Industry alone, we feel that the slump from 2009 global down turn is far behind. Hotels industry in Abu Dhabi and in Dubai is projected for huge increase in revenue; check-in. the increase in that regard also shows a positive development scope.

If the indication of the report is anything to go by, we feel that growth projection in the hotel industry in UAE is tremendously huge. The AHIC (Arabian Hotel Investment Conference) 2011 that was held recently also take a stock of the matter of the economic aspects of the hotel industry in UAE. As per the said news reports, it states that the main ingredient for hotel industry in UAE is set to follow within the path of asset management and diversification of product, as  a means and measure to meet the global demand of the hotel industry in UAE. Starting from the year from January 2001 till date, occupancy rate have jumped to 24.1%. This is one of the dramatic developments in the hotel industry in UAE.  In addition, the RevPer (revenue as per available room) for UAE hotel industry also has increased from a mere US$92.46 in 2010 to US$102.32 in 2011. (TTG-Mena, 2011)

Rounding our analysis to the above tabular data and in particular to the new report, we feel that UAE hotel industry is heading for a smooth and dramatic recover from the slump it suffered in 2009 global economic downturn. It is not surprising to see the growth, since UAE is known to attract global travelers and businesses for the sheer element attached to its hotel industry. For that matter, UAE today is seen as global destination for all kinds of global events, be it business conference and the likes. Moreover, huge capital investment in UAE in the realms of transportation and infrastructural development of hotels presents an interesting side of the overall story as far as Hotel industry in UAE in concerned.

Conclusion

From our brief fragmented analysis, we can round up that Hotel industry in UAE is not a mere object to think about. Since the 2009 global economic downturn, UAE have recovered dramatically in all sector of the economy. It is also being observed that hotel industry don’t lack far behind in recovery. The UAE government and its initiative to increase and create awareness about various programs, and back-to-back conference that are held in the country as well as tourism development programs and its development have been specific to contribute towards the growth of Hotel/Hospitality industry in UAE. The above analysis which we have defined the very basis of revenue earning for hotels and number of guest and nights stays are some examples of the economic aspects that is generated from visitors who often prefer coming to UAE for all the luxury treatment and preference of 5 and 7 star accommodation.

UAE we can conclude presents ‘once in a lifetime opportunity’ for global globe trotters and business men, who are often seen heading to UAE for all kinds of conferences. To top it all, UAE also boast of major hotels. There are also major tourist attractions in the UAE such as the palm island. Increased infrastructural development and investment made in that regard is positive step taken by UAE government, a actor which also have boost its hotel industry and the national economy besides contributing directly and indirectly to the global economy and hotel industry.