Dubai has been amongst the hottest tourist destinations in the world. People have flocked from all over the world just to see the man built marvels from all corners of the planet. Recently Dubai real estate has been facing serious downturn after the unrolling of financial crisis. Hotels in Dubai were doing a good job in profiting their owners. But as the Dubai’s episode of financial crisis unfolded, it snatched all the glitter out of hotels in Dubai. Some of the major factors affecting the business of hotels in Dubai are discussed as under.

Low business activity

As the financial crunch panicked in, it directly affected the level of business activity carried out in Dubai. Dubai has been a trading hub of UAE. With decreased levels of business activity the vacancy rates of hotels in Dubai increased. This will improve over time and till it gets to the required level, hotels in Dubai have to survive at the bare minimum.

Increased direct and indirect competition

With a reduction in the number of people coming to Dubai, the competition in hotels has also increased. The rates have been revised many times in the past few months, which have gradually eroded the bigger portion of margins earlier received by hotels in Dubai. Apart from the direct competition faced by luxury hotels in Dubai, they are also being exposed to the indirect competition. A lot of real estate agents in Dubai are making arrangements to fill the gap of vacant vacancies by accommodating short term visitors to Dubai. These short term visitors earlier used to stay in Hotels, but now they can pay less and live for more time.

Reduced foreign traveling

Earlier foreigners were flocking to Dubai because of the economic boom all over the world. With the financial crisis hitting the entire western world, hotels in Dubai have been deprived of a major share of clients from abroad.

Pegging of AED against dollar

Dubai currency has been pegged against dollar. Financial crisis in Europe has reduced the values of euro and pound sterling against the US dollar. This has also reduced the purchasing power of the foreigners coming into Dubai from Europe. Thus pegging has also impacted the hotels in Dubai indirectly.

Cheaper alternates to Dubai

Dubai is a costly place, and even though financial crisis has hit Dubai but it hasn’t been able to lower the cost of traveling and living in Dubai. On the other hand there are many destinations for the tourists in Europe and other parts of the world, which are much cheaper than Dubai.

Dubai’s tourism and hotels industry will have to look into all these problems to bounce back from this dull period of economic slump.

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