Summer Tourism

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The UAE's tourism sector is attracting attention as mixed early results for the summer season have shown a decline when compared to previous years.

Despite a strong start to the year, some hotels are reporting that their occupancy rates in June and July are the lowest they have seen in years.

"In 2006, the summer has been weak," said one general manager of a major hotel chain in the northern emirates. "It reminds me of summer [seasons] that I had forgotten."

Where in 2005, it was at times impossible to get rooms at short notice in Dubai, this year there appears to be plenty of space, and hotels have had to adjust their numbers accordingly. In early July, one hotel reported that occupancy was "down to 60-65%".

If there was one drawback to the UAE's tourist industry, it is the searing - and long - Gulf summer, which some years sees temperatures remain over 40 C from late May until October.

But between 2003 and 2005, many UAE hotels seemed to have avoided the summer slump, posting occupancy numbers around 80% in Dubai - the Burj al-Arab officials said they had close to 90% during last summer. Even in the northern emirates, where hotels usually were half full in the summer, recorded numbers at around 70% in 2005.

Partly to blame are the escalating hostilities between Israel and the militant group Hezbullah, but some hotels say sport and not the conflict is to blame.

"It was accentuated by the World Cup, which has kept people from travelling," said one general manager of an international hospitality company. Since FIFA controlled all the television rights to all the games, individual hotel rooms were not equipped to watch the games, he said.

In addition, the warm summer weather in Europe, say some hotels, has kept eastern European and Russian travellers - extremely important segments for non-Gulf Cooperation Council (GCC) tourism in the summer - closer to home.

The looming question, however, is if the quickly escalating situation in the Levant boils over into a larger regional war what affect it will have on an already soft summer tourism season.

The UAE, through brilliant marketing and its almost spotless security record, has been able to avoid the tourist declines that have affected other countries during regional conflicts. Despite ongoing hostilities in Iraq and Afghanistan, along with concerns over Iran's nuclear programme, all seven emirates' tourism sectors have not just shown resilience, but growth, generally posting strong numbers each year since 2001.

The charge has been led by Dubai, which, in 2005 had a revpar (revenue per available room) of $174, the second highest in the world, and an 86% occupancy rate, the world's best, according to Dubai's Department of Tourism and Commerce Marketing. Last year, the emirate welcomed over 6m tourists by offering a diversified package of leisure, business, luxury and niche products, and has ambitious plans to achieve 15m visitors by 2010.

Dubai's success has been infectious. As the UAE's largest and richest emirate, Abu Dhabi has become very active, launching several massive tourist initiatives this year, including the Dh100bn ($27.2bn) Saadiyat Island project, which will feature the largest Guggenheim Museum in the world. Following rollouts like al-Raha Beach Resort and the opening of the iconic Emirates Palace hotel, Abu Dhabi hopes to boost tourism from around 1m in 2004 to over 3m by 2015.

Sharjah, adjacent to Dubai, has seen hotel and short-term stay room nights swell to close to 1.5m in 2005 from a more aggressive approach to tourism and the spill over from Dubai's record-setting performances. Positioning itself as the "City of Culture", Sharjah hopes to attract tourists looking for family activities and a more Arabian experience, according to the Sharjah Commerce and Tourism Authority.

In the north, Ras al-Khaimah, counting on its mountain peaks and raw coastline to draw visitors, has five to seven hotels currently under development. In the works is a $100m beach development by the Hilton, along with the Dh10bn ($2.72bn) Mina al-Arab with nine 5-star hotels to be developed in a mixed-use tourist, leisure and residential resort.

Even Ajman, the smallest emirate, is drawing up plans to develop seven to eight hotels on its corniche - which has some of the best beaches in the UAE - in the coming years.

While many years of strong growth in most emirates keeps optimists confident that the UAE can ride out any regional problems, tourism may be falling victim to its own success.

Inflation, which has been fingered as one of the major obstacles to further growth in the UAE, is spreading to the hospitality sector. Since 1998, prices have more than doubled - from 2003 to 2004 alone some hotels hiked rates more than 50%. Besides Dubai's world-leading revpar, hotels in Ras al-Khaimah and Ajman admit to having average rates of $120 and charging as much as $270 in high season.

These rates are expected to drop as soon the large numbers of projects are completed, but many will not be completed for another decade. In the meantime, the UAE has to hope customers still are willing to pay rates in line with the world's most expensive cities.

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