Dubai – Decypha: The United Arab of Emirates (UAE) has been giving great attention to its tourism sector, especially in terms of its ambitious economic plan. The industry performance has placed the country as a world leader both in terms of figures and popularity, rendering the sector the safest way for the country to expand beyond its oil sector –which currently accounts for 40% of its domestic income.
In 2016, the total contribution of travel and tourism sectors to the gross domestic production (GDP) recorded AED 159.1 billion ($43.3 billion), representing 12.1% of GDP, according to forecasts by the World Travel & Tourism Council (WTTC), this figure is expected to be doubled in the coming 10 years. The sector’s share of GDP is also expected to grow by an additional 2.9% in 2017.
Furthermore, tourism in UAE is expecting to reach a total value of AED 64.5 billion ($72.0 billion) by 2027, yet as other sectors are projected to expand as well, this figure is expected to only represent 12.4% of the country’s GDP then.
In terms of jobs, in 2016 travel and tourism combined supported 317,500 jobs, accounting for 5.4% of the country’s total employment. The number of tourism related jobs is projected to grow by an average of 2.4% per annum to reach 410,000 jobs by 2027, representing 5.9% of total UAE employment, according to the same report.
Looking deeper into different emirates, differences begin to emerge, for example, Dubai as the focal point of UAE’s image, mostly attracts luxurious travelers, whereas Abu Dhabi is more on the calmer side, with a greater percentage of business related travelers.
Sector performance: Dubai
Dubai is ranked as the top travel destination in the Middle East. It is placed as the world’s fourth most visited city after Bangkok, London and Paris, according to the latest reports by Department of Tourism and Commerce Marketing (DTCM). It is also ranked the third most popular destination in the world by the 2016 annual Mastercard Global Destinations Cities Index.
In terms of international visitors spending levels, the city has jumped to the top rank hitting a spending level of $31.3 billion, overriding the second-ranked London that reached only $19.8 billion, based on the same index figures.
Dubai has succeeded in positioning itself as a global leader in the tourism map. Additionally, the city has ensured it supports its tourism industry, with technically advanced infrastructure, especially in terms of communication and transportation.
The occupancy rate in hotels in Dubai amounted to 80.7 % in 2016 whereas in 2015 the rate reached 77.4%, according to Statista an online statistics, market research and business intelligence portal.
Regarding the number of hotels, by the end of 2016, Dubai had 475 hotels and 205 hotel apartments' buildings. Number of hotel rooms reached 77,879 rooms by the end of 2016 while there were 24,966 rooms in the hotel apartment's buildings, according to the latest report by Dubai Statistics Center.
Sector performance: Abu Dhabi
Looking at Abu Dhabi, the city is considered to be the fastest growing in the Middle East and the third worldwide. With a growth rate of 19.81% in terms of number of visitors, the emirate is strengthening the country's position as the most visited and fastest growing country in the region for the second year in a row, according to the 2016 Mastercard Global Destinations Cities Index.
In terms of guest arrivals, the city has set a new record hitting 4.4 million guests in 2016, registering an 8% growth in comparison to 2015, according to the year-end figures by Abu Dhabi Tourism & Culture Authority (TCA Abu Dhabi).
For hotel occupancy rate, Abu Dhabi had a similar level to that of Dubai, recording an 80.7% average occupancy level in 2016, a slight boost in comparison to 2015’s average occupancy level of 77%.
For the first two months of 2017, January and February, Abu Dhabi received a total of 749,650 hotel guests in 170 hotels and hotel apartments, increasing by a remarkable 87% than the corresponding period in 2016, wich recorded only 40,000 hotel guests, according to the TCA.
This year the TCA authority is expecting to Abu Dhabi’s guest to reach 4.9 million guests for 2017, representing a year-on-year increase of 10%.
Challenges Faced
The number of tourists who visited Dubai in 2016 increased by 5% in comparison to the previous year, despite the Indian demonetization, an economic slowdown in Saudi Arabia, and the Brexit hitting its three biggest source markets.
Additionally, the number of overnight visitors heading to Dubai in 2016 increased to reach 14.9 million from 14.2 million a year earlier, topped by visitors from India, Saudi Arabia and the UK, according to figures published by DTCM.
However, these figures have fallen short of Dubai’s plans ambitions to grow at an annual rate ranged between 7 - 9%. Additionally, the emirate still needs to dramatically expand its numbers by nearly a third over the next three years that is to accomplish its goal of having 20 million tourists by Expo 2020.
There are current and expected obstacles which are caused by macroeconomic factors including lower oil price as well as currency fluctuations that will most probably negatively the country’s tourism sector.
Global political instability is also a challenge as safety are beginning to increase. A notable example would be the US and UK electronic ban on flights, a move that –that according to many experts—if proceeds may negatively impact the flow of tourists.
Due to the global challenges the UAE as a whole has witnessed a reduction of 3% in the average length of stay for visitors, as per the TCA data.
Forecasts: Dubai
As Dubai will host the next World Expo in October 2020, the event is projected to attract nearly 25 million visitors from around 180 nations. The mere announcement of the event in the region had an immediate positive effect on the flow of tourists, leading to the conclusion that any investment in real estate near the event location is expected to yield significant earnings, experts have based this assumption on the duration of the six month event, rendering the rent of property or lengthened stays at hotels an unavoidable occurrence.
The event is projected to generate nearly $23 billion for the emirate which is equivalent to nearly 24.4% of Dubai's current GDP, based on data compiled by Jones Day.
Additionally, Dubai is expected to keep adding hotel supply to its existing portfolio. Over the next two years the supply of hotel rooms and hotel apartment's buildings will reach 134,000 by the end of 2018. It is estimated that that 69 new hotels will be added in the period between this year and 2020, according to many current figures.
Forecasts: Abu Dhabi
For Abu Dhabi, the emirate is expected to exert efforts to enhance further growth in tourism sector. With the year-round program of events, it is planned to gain further growth across the tourism sector and achieve the target of reaching 4.9 million hotel guests during this year, HE Saif Saeed Ghobash, Director General of TCA Abu Dhabi said told AMEinfo.
Although globally Dubai is much more popular than Abu Dhabi as a tourist destination, the latter's efforts have succeeded to boost tourism, increasing the number of arrivals. Yet, as plans set by the Emirati government are proving to be too ambitious, both cities may require a boost in government actions and investment efforts.
By Nourhan Elsebahy
