Dubai hotels have slashed room rates to “unhealthy” levels
and risk never being able to hike prices again during better economic periods,
the chairman of the Al Habtoor Group said.

Khalaf Al Habtoor, whose firm owns several hotels including
Dubai’s Metropolitan Palace and the Habtoor Grand Resort Spa, said room
rates need to increase to cover operating costs.

“We are giving visitors very cheap rates in the hotels with
a lot of benefits. Really you lose on this pricing. People like to fill hotels
but this is really the wrong policy,” he said.

“If you go to Paris you will find the hotels from €800-1,000 and you go to London and the five star hotels will
be £500-800. You cannot find prices like here.”

Dubai has spent billions on transforming itself into a
global tourist destination. The emirate has more than 52,000 hotel rooms and is
home to iconic properties such as the flag-shaped Burj al-Arab and the first
Giorgio Armani-designed hotel.

The emirate attracted 8.3 million visitors in 2010 with
overall hotel occupancy in the first quarter 2011 – peak-season for Dubai – averaging
86 percent, according to Ernst Young.

Real estate consultancy Jones Lang LaSalle said in June the
Gulf hotel market was set for a boom in mid-range hotels, spurring increased price
competition between rival properties.

The country has enough budget hotels to cater to tourists on
smaller budgets, said Al Habtoor.

“I think there is no cheaper than the ones we have now, it
cannot be cheaper. There is an advertisement on Sheikh Zayed Road [that offers
rooms] for AED99 – that is not even $30.”

Dubai has more hotels under construction than any other city
in the world, according to a report by hotel projects tracker,
tophotelprojects.com.

The emirate currently has a massive 97 hotels under
development and 35,154 rooms due to come online, more than rival destinations
New York (43), Berlin (49) and even Las Vegas (17).