July 24, 2012

Peak Season vs. Low Season: Two very different experiences in UAE during Ramadan

While meeting business professionals on this first week of Ramadan, in the United Arab Emirates, they all witness extreme low demand with either empty rooms, empty treatment rooms or empty seats (Restaurant, Hair Salon, etc...). Everyone is trying to get additional business even thinking using the magic "demand feeder" grouping sites (Cobone, Groupon, Mox Deals...), but they fail to understand that there are some times in the year where there are low period of business.

So when I see , a vast majority of established 4-star hotel in Deira / Bur Dubai / Al Barsha / WTC, precisely 162 hotels on Booking.com, battling to be below AED 200 (USD 55.00), I am wondering what is left for your hotel profitability when you remove your 20-25% commission per night, cleaning costs, amenities, linens, your reservation staffing and rest of the personnel.

Similarly, Beauty Salon are falling into this gap of low prices for attracting new clients. Groupon advertised this week also a Body Scrub 60mn Treatment for AED 49.00 (USD 13.50). Calculating the 25-30% commission of grouping side, plus usage of linens and beauty products, amenities, I am wondering if it's not better to give it free of charge, as an experience.

I have been 6 years in the UAE, and we know as fact, that the first week of Ramadan, is low in revenue generations. Discounting therefore does not work, it just diminish your Brand product values, and not even generating a good margin, because demand is not there.

WHAT TO DO
Effective Business Planning is happening throughout exercises that are called Budget and Forecast. If you know that every Ramadan period, your business are not flourishing, then you have to create some advance cash flows in the previous months or adjust your inventory to have a successful Eid Weekend.

I met many business clients, that filled up their 2011 Ramadan with low average rate transaction, and then when we look at their profit and loss statement, there were negative, because for whatever business they brought, they still have to pay fix and variable expenses linked to running the place.

If you look at your historical statistics (providing you have accurate data), you will always notice that you had excellent revenue generations during the 4 days post Ramadan, because it is a big celebration, and people comes with their families and friends to celebrate it.



WHAT TO EXPECT FOR EID WEEKENDS: BUSY AIRPORTS, ROAD TRAFFICS + RESIDENTS DEMAND!!!

Same scenarios, look into your past historical revenue generation, and everyone coming from GCC would be celebrating in the UAE (Beach properties first, then city hotels). It's not a surprise why a vast majority of hotels are already selling quadruple digits rates on Sheikh Zayed Road, JBR, Marina, while hotels in Deira / Bur Dubai are more conservative.

Same goes for the Beauty Salon and Spa, where it is actually very busy season.

We all know that on August 26th 2012, when reviewing your figures, everyone would have top up nearly full occupancy of their businesses, and the question would be: "We could have maximize more, we will do better next time", because beside the revenue generation, the market share competition is the clear view on your performance.

Therefore if you have not yet anticipate a surge in demand for Eid Weekend, it still the time to "choose the business" that you would like to get as:
- Establish the correct pricing, knowing that you will have a strong 96 hours booking window too,
- Elaborate and Publish some specific packages (Hotel Room + Breakfast + 1 Value), to sell it at a decent rate,
- For Beauty Salon and Spa, privilege for high turnover of your spaces rather than 90-120 minutes package, because every one will attend function in town; you may want to keep some spaces for your top 10 regular clients too.
- Inform your staff that no day offs will be accepted during that periods,

Eid weekend will be the period that can bring you healthy profits, if you know how to manage the demand and inventory.

Wishing you Ramadan Kareem!

Romain @ http://www.RSVP-Hospitality.com



2 comments:

  1. Wonderful blog & good post.Its really helpful for me, awaiting for more new post. Keep Blogging!








    Yield Management

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  2. By the way,peak season is best season for hotel industry and that's why every hotel try to in their sales in peak season ...

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