·
Payroll will
eat into revenue as rates soften and RevPAR slides
·
New landfill
rates in Dubai puts waste management in focus during Ramadan
·
Summer heat
and humidity drive increased energy and water demand
Hotel operators
in the UAE are preparing themselves for a period of challenging trading
conditions as Ramadan and the subsequent summer season become ever closer, according
to Markus Oberlin, CEO of leading UAE-based FM and sustainability consultancy
Farnek, who was speaking on the sidelines of Arabian Travel Market 2018, which
opened on Sunday 22nd April.
Seasoned UAE
hotel managers know only too well, that generating revenue over the next few
months will be challenging, especially given the increase in supply and the
subdued seasonal demand, which generally results in softer occupancy levels and
rates.
Overall, Chris
Hewett, director at TRI Consulting, estimated that RevPAR in 2018 could drop by
as much as 7%, once compared with last year. Indeed, the latest Q1 2018
industry figures released by STR support TRI’s forecast with RevPAR down 2.6% and 4% in Dubai and Abu Dhabi
respectively.
“Converting
that into hard cash, a hotel with 250 rooms, running at 80% occupancy, with an
average rate of AED 750, could lose as much as AED 3.8 million in revenue over
the course of a year and that’s not taking into account their F&B
operation, nor does it take VAT or inflation into the equation. So, hotels will
need to make savings, to protect their bottom lines, without compromising guest
service levels,” said Oberlin, “the question is how and where?”
One area could
be waste management. On average UAE hotels send 1,200 tonnes of waste to
landfill, half of which is food waste. That’s the equivalent of filling an
average hotel room, every five days and works out to 8.5 kilos per guest, per
night, compared with 1.2 kilos in Europe. And with Dubai Municipality
introducing new tipping fees next month of AED 80 per tonne for general waste,
it could become an expensive proposition.
“During Ramadan
the waste per guest, per night can increase by as much as 50%, much of it uneaten
food and that’s against a backdrop remember, of lower occupancies and softening
rates. A sound recycling procedure can reduce waste by 25%,” added
Oberlin.
Although
occupancies may be low, due to the heat and humidity, energy and water usage
increases proportionately. Guests often bathe more regularly and of course air
conditioning temperatures, have to be lowered for longer periods, which all add
up to higher electricity and water bills.
“Using
internet-based benchmarking software, such as Hotel Optimizer, hotel management
can record their energy and water usage, benchmark their performance and
identify potential savings. Currently, the average annual utility bill for a
five-star city hotel in Dubai is around AED 7.5 million. It is not unusual for
hotels to save 15-20% or put another way, AED 1.47 million,” said Oberlin.
“Even simple
devices such as A/C modules, LED lights and water aerators can dramatically
reduce utility bills,” he added.
One more expense that
many managers simply can’t get away from is headcount and payroll. During Ramadan and the long
summer months in particular, outsourcing can solve the problem of staffing a
half-full hotel and, particularly during Ramadan, outsourcing can
reduce costs in housekeeping and the F&B department, especially when only
one outlet might be open during daylight hours.
Offering
extended or unpaid leave might work in some situations but finding a balance
between permanent staff and a flexible cost-effective manpower solution is
clearly the way forward. By
some estimates, outsourcing can save hotels between 30% and 50% compared with
the cost of hiring full time in-house employees.
And because outsourced
staff have invariably worked in multiple properties, they hold valuable
experience. They are highly trained, fully qualified and can bring in new
ideas, whether it be efficient work practices or responsible working habits.
However, outsourcing is not the solution for all
GMs. Many remain apprehensive about the impact on company culture and
authenticity in service, while others are restricted by policies and
procedures. But the evidence to counter these arguments is growing.
“Outsourcing allows operators the flexibility
to align staff requirements with guest demand, on a day-to-day basis if needs
be, helping hotels regain control over their costs,” said Oberlin.
Photo caption: Markus Oberlin,
CEO, Farnek.
About Farnek:
Farnek
is the leading provider of sustainable and technology driven Total Facilities
Management in the United Arab Emirates. Established in the UAE since 1980,
Farnek Services LLC is a Swiss owned independent total facilities management
company.
With a skilled workforce of more than 4000+
employees, Farnek delivers professional Facilities Management services to
across several sectors; Aviation, Hospitality, Banking, Retail, Shopping Malls,
Telecom, Residential, Commercial, Infrastructure, Government, Education,
Leisure and Entertainment.