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SECTION A [100 Marks] Price War: Call For Intervention in Dubai's Hospitality Sector As Room Rates Drop Below Dh100 A Night Call for strong intervention to stop this costly room rate war until demand returns. Dubai's three- and four-star hotels could take a longer time to get back the demand they lost during the pandemic. But resorting to costly rate cuts to drum up demand will be counter-productive, industry sources warn. Dubai: Only drastic cuts to fees and commissions on hotel bookings can ensure the longer term survival of three- and four- star properties in Dubai, according to industry sources. The room rates have already dropped below unsustainable levels at some of the city's three- and four-star hotels. "Many single hotel owners with unbranded properties - especially in the Deira area - have dropped rates below Dh50 per room per night on OTA (online travel agent) platforms," said Praveen Shetty, Chairman of Fortune Group, which owns or operates four-star hotels." Chairman of Fortune Group, which owns or operates four-star hotels." *The guests who typically book at four- or three star stays are unlikely to return in sizeable enough numbers for the next six months at least. These properties are overly dependent on travellers from the Subcontinent and the Far East - and they will not be rushing back unless a COVID-19 vaccine is found and proved to be effective. "That's not the case with five-star and resort hotels, which have benefitted from staycation deals and travel from the UK and Europe, Long-term solution Industry sources confirm that entry and mid-tier hotels are disproportionately hit by the pandemic fallout. And even dropping room rates have failed to bring the guests back, because in most cases air travel to the key sourcing countries are yet to take off. Some three and four-star hotels are stuck with occupancy rates of below 20 per cent for the better part of this year. Other hotels are relatively better off by hosting visitors from the other Gulf states, and who are using Dubai for a connecting flight to their home country or to return to their place of work. Other Gulf states are yet to allow relaunch of international flights across their networks. But this demand for overnight stays in Dubai will only last until the other Gulf states don't allow direct flights to more destinations, which is why a longer term solution is needed, hotel sources add. Set minimum room rates Shetty is calling on Dubai's tourism authority to intervene and "benchmark hotel room rates. "What we suggest to stop this rate war is a benchmark for three-star and four-star hotels to not sell room rates below Dh125 and Dh 150 exclusive of applicable taxes and fees," he said. "Everyone shall benefit by this move... and ear collectively." Revise commissions With the pandemic continuing to exert its influence on hotel room demand from overseas visitors, this could be the right time to revise commission structures in the industry. Especially on bookings made for hotel stays by "domestic tourists". In particular, the commission paid to online travel agents should be brought down to 5 per cent from the prevailing 15-25 per cent. And the hotel industry should move to a variable commission pay-out to the booking platform based on rates: If the room rate is below Dh100 per night, the commission should be 5 per cent: If room rates are in range of Dh100-Dh300 per night, it could be 10 per cent - If room rates are higher than Dh 300 per night, then the commission cay be 15 per cent. "Some far-reaching changes need to be made on the costs involved, or else the weaker hotel brands will disappear," said Shetty. There is already excess capacity across every star category for hotels in Dubai. "In these circumstances, on a typical four-star management contract, the breakeven for the hotel operator could be well beyond five years. Not all operators will be able to sustain themselves through this period." om Answer ALL the questions in this section. Question 1 Consider the information presented in the case study above. Evaluate the key marketing issues and their implications. (20 Marks) Question 2 (30 Marks) Discuss the pricing strategies available to Dubai three and four star hotels. What considerations are taken into account upon deciding on the pricing strategy to pursue? Question 3 (30 Marks) With the article above in mind, propose how the three and four star Dubai hotels can design a customer driven marketing strategy and segment the consumer market. Question 4 (20 Marks) "Public relations can impact public awareness at a much lower cost that advertising." Discuss how the Dubai hotels can utilise the power of public relations in these covid-19 times to create awareness. SECTION A [100 Marks] Price War: Call For Intervention in Dubai's Hospitality Sector As Room Rates Drop Below Dh100 A Night Call for strong intervention to stop this costly room rate war until demand returns. Dubai's three- and four-star hotels could take a longer time to get back the demand they lost during the pandemic. But resorting to costly rate cuts to drum up demand will be counter-productive, industry sources warn. Dubai: Only drastic cuts to fees and commissions on hotel bookings can ensure the longer term survival of three- and four- star properties in Dubai, according to industry sources. The room rates have already dropped below unsustainable levels at some of the city's three- and four-star hotels. "Many single hotel owners with unbranded properties - especially in the Deira area - have dropped rates below Dh50 per room per night on OTA (online travel agent) platforms," said Praveen Shetty, Chairman of Fortune Group, which owns or operates four-star hotels." Chairman of Fortune Group, which owns or operates four-star hotels." *The guests who typically book at four- or three star stays are unlikely to return in sizeable enough numbers for the next six months at least. These properties are overly dependent on travellers from the Subcontinent and the Far East - and they will not be rushing back unless a COVID-19 vaccine is found and proved to be effective. "That's not the case with five-star and resort hotels, which have benefitted from staycation deals and travel from the UK and Europe, Long-term solution Industry sources confirm that entry and mid-tier hotels are disproportionately hit by the pandemic fallout. And even dropping room rates have failed to bring the guests back, because in most cases air travel to the key sourcing countries are yet to take off. Some three and four-star hotels are stuck with occupancy rates of below 20 per cent for the better part of this year. Other hotels are relatively better off by hosting visitors from the other Gulf states, and who are using Dubai for a connecting flight to their home country or to return to their place of work. Other Gulf states are yet to allow relaunch of international flights across their networks. But this demand for overnight stays in Dubai will only last until the other Gulf states don't allow direct flights to more destinations, which is why a longer term solution is needed, hotel sources add. Set minimum room rates Shetty is calling on Dubai's tourism authority to intervene and "benchmark hotel room rates. "What we suggest to stop this rate war is a benchmark for three-star and four-star hotels to not sell room rates below Dh125 and Dh 150 exclusive of applicable taxes and fees," he said. "Everyone shall benefit by this move... and ear collectively." Revise commissions With the pandemic continuing to exert its influence on hotel room demand from overseas visitors, this could be the right time to revise commission structures in the industry. Especially on bookings made for hotel stays by "domestic tourists". In particular, the commission paid to online travel agents should be brought down to 5 per cent from the prevailing 15-25 per cent. And the hotel industry should move to a variable commission pay-out to the booking platform based on rates: If the room rate is below Dh100 per night, the commission should be 5 per cent: If room rates are in range of Dh100-Dh300 per night, it could be 10 per cent - If room rates are higher than Dh 300 per night, then the commission cay be 15 per cent. "Some far-reaching changes need to be made on the costs involved, or else the weaker hotel brands will disappear," said Shetty. There is already excess capacity across every star category for hotels in Dubai. "In these circumstances, on a typical four-star management contract, the breakeven for the hotel operator could be well beyond five years. Not all operators will be able to sustain themselves through this period." om Answer ALL the questions in this section. Question 1 Consider the information presented in the case study above. Evaluate the key marketing issues and their implications. (20 Marks) Question 2 (30 Marks) Discuss the pricing strategies available to Dubai three and four star hotels. What considerations are taken into account upon deciding on the pricing strategy to pursue? Question 3 (30 Marks) With the article above in mind, propose how the three and four star Dubai hotels can design a customer driven marketing strategy and segment the consumer market. Question 4 (20 Marks) "Public relations can impact public awareness at a much lower cost that advertising." Discuss how the Dubai hotels can utilise the power of public relations in these covid-19 times to create awareness