How Middle East Hotels Adapted to Regional Conflict with Staycations, Incentives, and Cost Controls

International hotel brands operating in the Middle East have been moving swiftly to deal with the shock caused by the Iran war. They have cut costs wherever possible, shifting to focus on the local market by offering deals and packages for staycations. Others have temporarily shut some hotels for refurbishment.

“We did not furlough any team members, not in the field, not in the office,” said Haitham Mattar, managing director for India, Middle East and Africa at IHG Hotels and Resorts. “We did have to temporarily close some hotels, but we opened right back up, and that temporary closure was taken advantage of, whether it's refurbishment, renovations, deep cleaning. But we have actually managed, [and] we haven't necessarily cut down salaries.”

Accor's UAE hotel occupancy rates dropped substantially to 20 per cent in March, compared to 80 per cent in January and February, said Duncan O'Rourke, the group's chief executive for the Middle East, Africa and Asia Pacific. Booking cancellations by corporate travellers and European leisure travellers were immediate. In response, Accor, which operates 90 hotels in the UAE, cut room rates by 15 to 20 per cent in some properties, closed six of its hotels for full refurbishment, offered free booking cancellations and initiated a profit-protection programme.

That included offering senior management vacation time, moving employees to hotel pre-opening events in other locations and pivoting to the domestic and Gulf markets. "We didn't lay anybody off, we learnt from Covid," Mr O'Rourke said.

The main priorities for Wyndham Hotels and Resorts after the war broke out were ensuring safety, keeping the lights on at its hotels and making sure there were no job cuts, said Dimitris Manikis, the company's president for Europe, the Middle East and Africa. He said when the conflict first began on February 28, “we all thought this is going to last only a few weeks, and it didn't”.

“When we all realised that it's going to last longer, what we've done, we looked at staycations, we looked at enhancing our food and beverage proposition because people need to still go out and eat,” Mr Manikis added. The company lowered its rates by about 30 to 40 per cent to be competitive, but that helped keep occupancy, he said. Last month, Wyndham's average occupancy stood at about 85 per cent.

Dubai-based JA Resorts and Hotels has been repositioning itself as far more than a traditional hotel operator to cushion the impact on its business. “Instead of joining a race to the bottom on price, we’re doubling down on experiences – from our new integrated sports and shooting complex and expanded Mice offerings in Jebel Ali to packaging Hatta for adventure and offsites,” said Phil Dickinson, vice president of sales at JA Resorts. The new complex will include six Fifa-standard football pitches, two cricket ovals, and a 28-lane shooting range.

With many international airlines suspending flights to the region and a drop in leisure tourism, most hotel operators shifted to focus on bringing in more local and regional travellers. IHG, which operates 226 hotels across India, the Middle East and Africa, including 39 in the UAE, is also focused heavily on offering incentives to local guests.

For now, the projects in the pipeline for all of the hotel chains remain unchanged, although they acknowledge there will probably be some delays. Investors and owners are looking at the disruption as a short-term conflict, Mr Mattar said. Operators expect the regional market to rebound strongly once international airlines resume flights to the UAE and the region and tourism picks up again.