Dubai leads growth in tourist numbers

Published in MEED, 29 October 2017

To get an idea of where growth is coming from in the UAE’s tourism industry, one only needs to look at the focus of its airlines. Over the summer, Dubai’s flag carrier Emirates upgraded its flights to Moscow, Beijing and Shanghai to all-A380 services, with the switch to the superjumbo adding 1,000 seats a week on the Moscow route alone. In September, low-cost airline Flydubai doubled its capacity on routes to Russia.

These developments are a consequence of decisions over the past year to offer Chinese and Russian visitors a visa-on-arrival service. Since then tourism authorities have reported strong growth from the two countries, which now rank among the most important source markets for visitors.

Dubai, for example, says it had a 55 per cent increase in the number of Chinese tourists in the first half of this year, compared with the same period in 2016, and a 97 per cent rise in the volume of Russian visitors. About 413,000 Chinese visitors came to Dubai between January and June, making it the fifth-largest source market, while 233,000 Russians arrived, placing the country in the top 10.

The undoubted benefit from the tweak to federal visa policy raises the question about whether the UAE’s tourism industry could benefit from other country-wide initiatives. There are some structures already in place: a National Council for Tourism has been part of the Ministry of Economy since 2015, for example. There are also efforts to avoid too much direct competition between emirates, with Abu Dhabi focusing on its culture and sports credentials, while Dubai draws in visitors for shopping, entertainment and high-end hotels. That diversification makes it hard to develop national strategies, however.

“All emirates work together very positively to define the positioning for each emirate and not compete too much on a ‘me too’ basis,” says Sven Gade, the Dubai-based CEO of hospitality specialist PKF The Consulting House. “The products are so different and diverse that joint marketing would only make sense from a nation-awareness perspective, but that is not what tourists want.”

There are, of course, already some crossovers. Regardless of their final destination, most visitors come in via Dubai’s airports and some tour operators organise multi-emirate packages. But the sector remains one that is essentially run on an emirate-by-emirate basis and that seems to work well, based on the growth in visitor numbers this year.

Abu Dhabi had a 13 per cent increase in the number of hotel guests in August compared with the same month in 2016. That helped to take the total number of guests to more than 3.1 million for the first eight months of 2017, a rise of 7 per cent year-on-year. Overall occupancy levels were a healthy 76 per cent in the first half of the year, according to UK consultancy EY.

The Ras al-Khaimah Tourism Development Authority (Raktda), meanwhile, says it is hoping to surpass its annual target of 900,000 visitors, after its hotels reported a 10 per cent year-on-year increase in international arrivals during the first six months of the year. Average hotel occupancy was almost 75 per cent and there were 390,499 visitors to the emirate between January and June, with the peak season of late summer and the fourth quarter yet to be accounted for.

Haitham Mattar, CEO of Raktda, says the “best ever” results for Ramadan and June were “a direct result of strategic initiatives and promotional activities undertaken in domestic and international source markets”. Those initiatives included a campaign from April to September using the tagline ‘Feel Free this Summer’, aimed at both the domestic market and several of its key international markets, which include the likes of Germany, Russia, the UK and India.

Despite the welcome rise in visitor numbers to these corners of the country, none of the other emirates can compete with Dubai’s tourism industry. It recorded 8.1 million international overnight tourists in the first half of 2017, a 10.6 per cent increase on last year. Despite a 5 per cent growth in room supply over the past year, average occupancy across all hotel and hotel apartments stood at just over 79 per cent in the opening half of the year, says EY.

Dubai does not just lead the way in terms of visitor numbers, it also had the highest revenue per average room (RevPAR – a key industry metric) in the UAE, according to EY. The consultancy’s Hotel Benchmark survey for the first half of 2017 showed Dubai with a RevPAR of $209, compared with $119 for Ras al-Khaimah and just $92 for Abu Dhabi.

That last number marks an ongoing fall for the UAE capital, which had average room yields of $116 in 2015 and $97 in 2016. The fall fits in with a wider trend. “The hospitality market continues to be affected by the drop in oil prices and challenging economic conditions, which has led to more conservative spending in the government and private sectors as well as among regional tourists,” says Yousef Wahbah, Middle East and North Africa head of transaction real estate at EY.

There have also been some difficulties for Dubai, including the fact that a recent big investment in theme parks has yet to pay off. DXB Entertainments says there were more than 1 million visits to its theme parks in the first half of the year, but that was not enough to prevent the loss-making firm initiating a cost-cutting drive.

That may make some people in Abu Dhabi concerned, given the need to make a success of the hugely expensive Louvre Abu Dhabi, which is due to open in November, but Gade suggests it would be wise for people to hold their nerves.

“The concept of visitor numbers, average spend and other key performance indicators building up over time are firmly established globally,” he says. “On top of that, one has to consider that the theme park product is quite new to Dubai. A new segment is opening, which has been anxiously awaited in the industry as the destinations need additional, new and more diverse attractions for visitors. My expectation would be that this product will settle into the market successfully over time.”

If all those new Russian and Chinese passengers arriving in Dubai can be persuaded to include a trip to a theme park as part of their holiday, there may yet be a need for even more flights to and from those countries. Whether they go on to visit other parts of the country, however, will be down to the marketing efforts of the other emirates’ tourism promotion boards. The lack of an integrated nation-wide transport system will deter many from even trying.