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March 11, 2009

Meetings back on the radar

As hotel room inventory grows and occupancy levels from the FIT market dwindle, markets across the Middle East are now courting the meetings industry. Favourable room rates and a host of meeting-related add ons prove that markets are finally taking this highly lucrative sector seriously.


Hotel occupancies for many Gulf markets have run at over 90 percent for the last two years and enjoyed average room rates in excess of US$300 per night, mainly due to their reliance on the high-yield FIT market. This has prompted a loss of focus on business tourism and a heavy reliance on one tourism sector. But now these markets are changing tack.


Markets across the Middle East have seen hotel occupancies drop in 2008 over 2007, with larger fallout expected for 2009. For 2007, Dubai hotels enjoyed an average occupancy of 83.2 percent, which fell back to 78.9 percent for 2008, according to STR Global. Bahrain also saw occupancy drop, from 73.5 percent in 2007 to 71.9 percent in 2008. In the first quarter of 2009, some properties in Dubai were said to be struggling with occupancies of 40 percent and lower.


The falling value of the pound sterling and euro currencies has fuelled the situation. Prices, which were already among the highest in the world, have become higher still for travellers from the euro zone. Add to that the economic challenges being felt across the board, and a new influx of hotel stock, and hoteliers have had to rethink their marketing strategies.


Industry leaders have been vociferous in their calls for hotels to lower prices and offer terms and conditions more akin to the meetings market. Now, it seems, their voices are being heard.


“Some of the hotels are truly world class but often with a price tag to match. The region must compete better on price through the whole supply chain particularly at this current time. It is a buyer’s market,” maintains Paul Kennedy MBE, group exhibitions director, meetings and incentives events, Reed Travel Exhibitions.


As leisure tourism falls back, the potential for business tourism and the meetings industry is now being measured, and markets are finding that there is more to be gained from playing host to corporate groups rather than focusing on discounted room rates and daytime meeting rates.


MPI and American Express’ recent FutureWatch study showed that while meeting attendance in other markets is in decline, the Middle East, Europe and Africa should post a growth of three percent in 2009.


According to the study, face-to-face meetings are still considered to have the highest ROI of all marketing tools.


Many global organisations see their growth coming from the Middle East in 2009, corporations are re-locating to the region with head offices, branches and satellite operations while at the same time companies in the Middle East seek to tap opportunities regionally – seeking business in Qatar, Saudi Arabia and other destinations when business conditions tighten in their home markets.


Buyer’s market

Now is the time for the meetings industry to re-establish itself at the forefront of regional tourism. Hotel rooms are in abundance and rates are dropping to come in line with corporate budgets. The buyers - the destination management companies and professional congress organisers - are already feeling the benefits.


“Dubai’s planned future is the meetings industry. They have to ask - can they fill all these hotels with FITs? No,” says Ali Abu Monassar, executive chairman, Net Group.


“Today, the situation has changed. The shifting time was so quick we find ourselves suddenly perceived by hotels as the answer. Dubai is and it will be a meetings destination but it takes time, especially to attract the big associations meetings. These can take five to ten years to win.”


According to Abu Monassar, now key industry segments such as hotels are seriously considering the meetings market the destination can truly begin to compete with international markets.


“Look at Singapore. It is now the number one international meetings destination according to the Union of International Associations (UIA). They worked for ten years to achieve that. They realised that Singapore was not a leisure destination. We can learn a lot from Singapore,” he says.


Now the market is price conscious, DMCs such as Net Tours – the tour operator arm of Net Group - are shifting to new channels and revisiting segments of business they have been unable to accommodate in the past. “We are going back to customers and segments of business we couldn’t accommodate two years ago to let them know that Dubai is open and prices are coming down,” Abu Monassar admits.


According to Net Group, hotel prices have dropped by as much as 30 percent, and hotels are becoming more flexible with rates and added values. However, Abu Monassar does see a caveat in the new market conditions. “I hope that, even though the situation will change, hotels will continue to focus on the meetings segment,” he sagely remarks.


Frederic Bardin, senior vice president, Arabian Adventures, echoes Abu Monassar’s sentiments. “For a few months now hotels have substantially decreased their rates for groups, both for rooms and for conference space. Hotels have also revised their terms and conditions in a favourable manner, including dropping their requirement for a minimum spend on F&B and offering more flexible cancellation and attrition policies,” Bardin says.


“We certainly hope this is not just a trend but that it is instead heralding a return to essential core values. The path to long-term, sustainable development, which we at Arabian Adventures have always been strongly committed to, includes consistency and continuity on one hand and a healthy clientele mix on the other. To ‘turn taps on and off’ for a certain type of clientele or for certain markets is a tactical sales tool, which (by definition) can only be used on limited portions of the market and for restricted time periods. A sound business strategy is what is required for long-term, sustainable growth,” he adds.


In Bahrain, where a price cartel keeps a check on prices at five-star hotels, DMCs are also seeing a change in attitude towards offering more added extras for little to no extra cost.


“Hotels are desperate to have higher occupancies and hence there is a change in attitude. They do not discount on the rates, but are willing to negotiate on meals packages for groups,” explains Isaac Mathew, general manager, Algosaibi Travel.


The Bahrain price cartel increased its minimum room rates for standard five-star rooms and group rates back in October. However, negotiations are now underway to revise the group rates back downwards.


Matthew says that hotels are now more receptive to discussing groups business now that the leisure market is in decline.


In Oman, a market that has embraced the meetings and, predominantly, incentives market, rate cuts are also being delivered to DMCs.


Michael Crawley, managing director of Ejabyah, says: “We have always found the majority of Oman’s hotels to be very receptive in discussing groups. Yes, we have noticed a slight drop in rates. But remember that Oman is under-represented in terms of five-star properties so therefore we are not seeing the rate slashing craze like Dubai.”


Main events

Event planners are also benefitting from the new, more proactive approach of venues and corporations.


“Venues in Dubai in particular are now more proactive and more receptive to our needs than before. There’s a greater openness to discuss events of all shapes and sizes and not just group business – something that previously wasn’t seen as a priority. Hotels are exercising a far greater readiness and flexibility to take smaller bookings and accommodate last minute changes such as dates or number of rooms,” says Rajesh Sabhnani, director of operations, Artaaj Events & Promotions.


“It’s important to remember that although the global downturn is of course having an impact, the hotel landscape in the region has changed too. It’s far more competitive, there are more venues to choose from than there were twelve months ago. For a dinner for 700 people, you now can look at a number of ballrooms - and if there are greater choices for large events, there are a myriad more for smaller ones,” he adds.


According to Sabhnani the market is now showing signs of maturity when it comes to meetings and events. Venues and service providers are focusing on providing service levels on a par with other business centres worldwide.


“Hotels are going the extra mile and offering more in terms of service and value; something that we in turn can pass on to our clients. For example, a number of hotel groups are reducing or waiving charges for room hire during set-up – which can be a significant cost for many of the larger events that we handle. If, as is usually the case, we’re working to a fixed budget then we can ensure that this money is put into F&B spend or additional services provided by the hotel – so everyone benefits in the long run.


“We’re also delighted to see hotel staff taking a more holistic and rounded approach to the true value of groups business and events, whether large or small. There is growing recognition of the fact that people attending meetings or conferences are more likely to stay in the hotel, and attendees will use restaurants and bars on site - making a significant contribution to the bottom line over and above the straight fee income from room hire and catering.”


Conventional approach

Large-scale meetings are one market sector set to see huge growth as the Middle East realigns its tourism strategies to accommodate the meetings market. Until recently, many markets have been unable to offer the volume of hotel rooms to cope with meetings in the tens of thousands, but now we are seeing convention bureaus and tourism bodies take the mantle and enter the bidding process


Doha will have four major exhibition/conference facilities by 2012; Abu Dhabi is in the midst of its development to accommodate major meetings and Dubai is struggling to keep up with demand until it completes new venues. Saudi Arabia is also a market most people overlook yet is the largest Middle East market for the meetings industry with many major companies even having their own convention venues.


Already, the bidding process is yielding results. Dubai will host the Human Genome Meeting in 2011 while Abu Dhabi will welcome more than 12,000 delegates for the World Ophthalmology Congress in 2012.


What the hotels say

Many hotel chains have a groups policy and in the Middle East even beachfront properties that may predominantly cater to the leisure markets are focusing in part on this market.


For some business hotels the recent return of corporate groups has left them clamouring for more meetings space. This is the case of the Grand Millennium Hotel in Dubai. Open less than a year, the five-star property is already working towards expanding its meeting facilities.


“We are short of meeting rooms. We could fill more,” admits Robert Zogby, general manager, Grand Millennium Hotel, Dubai.


“Our serviced apartments and hotel rooms offer us the opportunity to cater to a diverse customer profile. We attract long-stay guests who are management and senior management level and for them the opportunity to book corporate meetings in the same building where they live is a huge plus. We are well positioned to cater to a lot of day meetings. However, we had so much demand from groups with overnights that we had to stop daytime meetings from local companies, which created an issue for us.


“So now we are looking to add more meeting rooms. We will add up to 500 square metres of divisible space to allow more flexibility in space utilisation and attract local corporate meetings and large groups staying in the hotel,” Zogby explains.


The plan is to build a two-storey ‘bridge’ between the two buildings of the hotel. This space will be accessed by panoramic elevators direct from the ground floor, providing private access for events requiring extra security.


“We have a lot of potential. There are 100 buildings in this area and in three to five years, when TECOM is finished, we will be in a very strong position. We see a lot of positive outlook beyond 2009 from both the corporate and leisure sector,” Zogby concludes.


Another new kid on the block, The Palace – The Old Town has also seen a steady rise in demands for meeting venues and corporate groups.


“The one constant for us is the groups booking,” says Olivier Heuchenne, general manager, The Palace – The Old Town.


“A group needs a location to go to, they need meeting rooms, we are targeting small to medium sized groups and we have as many groups as we did last year plus a few more,” he adds.


The hotel is working on establishing strong relationships with DMCs across the GCC, working with a limited number of strategic partners to provide a tailor-made approach to groups accommodation.


“I think it’s about understanding each others needs and being on the same page. You have to be able to partner in visits, FAM trips, site trips, tours and fairs; you have to represent together, and you have to do sales calls together,” Heuchenne says.


“When you have a partner it means you’ve asked all the questions, you’ve qualified and qualified, and really gone deep to find out what are the customers need. This is not just about me offering a package it’s about making it work so it fits and moulds.”


Talking of the drop in prices, Heuchenne sees it more as a market correction, and a strong move towards Dubai maturing as a destination.


“Dubai has hit a reality check that it can’t be as expensive as London, Paris, New York, or Tokyo. In some market segments we are as expensive as Tokyo which doesn’t make sense, at the end of the day. Dubai has ridden that wave all the way to the end, its going to normalise itself, so this can’t do Dubai any harm,” he maintains.


Ahmed Baki, regional director of sales & marketing for Starwood, also agrees that a price correction may be a good thing. “There has been some slowdown in average room rate in some markets but that has been compensated by increased occupancy. Overall, I wouldn’t complain,” he remarks.


Starwood is approaching the new market conditions with a renewed focus on customer relationships. The operator is rolling out a research programme on customer behaviour in emerging markets such as the Middle East.


“We need to properly look at the potential in these markets and understand more about our clients. For meetings and incentives we are seeing some growth in some feeder markets and some industries, such as the pharma market,” Baki explains.


For market stalwarts Jumeirah, which operates a portfolio of beachfront and inner city hotels, approximately 12 percent of all business is attributed to the groups segment, with room to grow this.


“Group business is incredibly important to Jumeirah and as the company grows and the portfolio expands, so too will our group business offerings,” says Craig Senior, regional director of sales, Gulf, Jumeirah.


“Hotels such as Madinat Jumeirah and Jumeirah Beach Hotel are located on the beach in Dubai; they are also very much city resort hotels. Both of these hotels have some of the best conference and meeting facilities in the world and we continue to welcome meetings, incentives and indeed business groups to these properties.”


Senior says that he and the rest of the Jumeirah team will continue to work closely with the Department for Tourism and Commerce Marketing, the Dubai Convention Bureau and Dubai World Trade Centre to drive meetings business to Dubai.


At a property level, packages are being created to include additional added benefits and value added initiatives for meetings and events.


“Going forward, our focus will remain on flexibility and innovation to look at new ways of doing business,” Senior remarks.


Communication between hotels and DMCs is opening up and leading to better industry understanding, which in turn is translating into a reinvigoration of the region’s meetings market.


Sound steps are being taken across the board to make sure that the meetings industry, now back on the radar of the Middle East’s tourism industry, remains on the radar for the years to come.

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