Average room rates in Abu Dhabi’s hotels fell around 10 per cent in the first five months of this year compared to the same period in 2015, reaching $132 in May 2016 and averaging $157 in the year-to-May period.

In May alone, room rates fell two per cent compared to the same month in 2015.

According to the latest report by HotStats, a data provider, hotels in Abu Dhabi were unable to offset the decline in revenues, and as a result, year-on-year profit per room fell by 6.9 per cent.

Hotel also saw a drop in food and beverage revenues by 11 per cent, and a 25.4 per cent decline in conference and banqueting revenues. This, coupled with a 3.7 per cent drop in revenue per available room, led to a 7.8 per cent decline in total revenue per available room at the capital’s hotels in May.

The drop in profits comes despite lower costs, with hotels reducing their labour costs by 8.5 per cent and their overhead costs by 4.8 per cent.

“Abu Dhabi’s got quite a heavy reliance on corporate and government demand to fill its hotels and that’s different from what you see in Dubai where there’s a strong leisure market.

So, with the challenges the region has faced over the last 12 month with softening oil prices and the currency changes, there’s been lower level of demand emanating from the government and corporate segments,” said Christopher Hewett, associate director at TRI Consulting.

He said such a drop in demand has forced hoteliers to lower their room rates lately. While this has not necessarily boosted domestic demand, it has helped attract overnight visitors who use Abu Dhabi as a layover on long trips.

“I think [performance indicators] are going to remain soft for the rest of 2016 … By the end of the year, I think we would have seen a four to five per cent reduction in average room rates and occupancy will probably remain on par with 2015 … Looking at the start of 2017, I think things will start rebounding and [we’ll] see growth over the first half of 2017,” Hewett said.

Elsewhere in the GCC, Jeddah’s hotels recorded a 47.6 per cent year-on-year increase in profit per room in May 2016.

This was a result of a number of key events happening in the city that led to higher demand, which meant an uplift in occupancy rates by 10.8 percentage points and a 24.5 per cent rise in average room rates. Revenue per available room also jumped 42.9 per cent.

In its report, HotStats said the increase was a welcome uplift in performance for hotels in Jeddah, which have suffered consecutive months of profit decline since September 2015.

Meanwhile in Cairo, hotels saw a 33.3 per cent increase in profit per room in May despite the challenges the Egyptian capital is facing. The EgyptAir plane crash on May 19, which killed around 66 people en route from Paris to Cairo, was the latest in a number of incidents that are likely to impact hotel performance in Cairo.

Hotels in May, however, recorded a 30.7 per cent increase in revenue per available room as a result of higher occupancy (up 9.5 percentage points) and higher room rates (up 14 per cent to $118).