Dubai: Hotels in the UAE are following airlines in asking their staff to go on unpaid leave, as the hospitality sector battles the full impact of the coronavirus on demand.
The move to sanction unpaid leave will impact mostly on middle-level managers rather than the daily operations staff for now, hotel sources say. Several properties in Dubai and Abu Dhabi are already pressing ahead with the move, which would, they believe, help them to drastically cut down on costs. Employees have been told to utilise all outstanding leave-in-lieu days and proceed on unpaid leave. (There are some who do get paid as well.)
That’s not all – other steps being taken by hotels to reduce costs include closing full floors to save on utilities, a temporary freeze on new hires and replacements, and postponing non-essential purchases. The UAE hotel industry had responded with similar steps back in 2001, after the World Trade Center attacks in New York put the brakes on global travel, and during 2009-10, when the economy was hobbled by the financial crisis.
A senior hotel industry executive said that hotels in the mid-tier space are even changing their food and beverage suppliers to minimise costs. For instance, “They are buying Brazilian meat at half the price instead of from the US or Australian meat,” he added.
Lower rung employees such as waiters and contract workers (who are there for banqueting and catering services, gardening and pest control) are not affected by this move. Employees are forced to take up the proposed option of going on leave or face redundancy.
Slash and then some more
At entry level 5-star hotels, rate have been slashed to Dh300 a night to try and convince travellers to book with them. At the luxury end of the hospitality market, properties are finding even rates as low at Dh1,200 a night is not winning them guests. (Some hotels have countered this demand dip by offering “staycation” packages for UAE residents.)
“I recommend hoteliers in regions affected by the coronavirus to offer special discounts to attract bookings and check all options to reduce fixed costs at the earliest,” said Dr. Tassilo Keilmann, CEO of Wellness Heaven Hotel Guide. “Some affected hoteliers have reduced their staff temporarily – if permitted by contracts. Other hoteliers have shut down parts of their hotels to save energy and reduce workload on their service personnel.”
While luxury hotels have not been hugely affected by cancellations caused by the virus outbreak, mid-tier ones that target corporate travellers have been affected. With firms like McKinsey and Ernst & Young have put strictures on corporate travel for their staff, business-related trips have nosedived. This is keenly felt by hotels.
Event cancellations have further compounded the hotel industry’s woes. With travellers from China, Italy and from within the GCC all but disappearing, hotels are among the worst hit. The general sense of caution related to travel and being in public places is weighing on occupancy and average daily rates.