Tourism growth in Dubai

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Introduction

The hospitality industry of Dubai has been contributing significantly to the growth of Dubai’s economy. Tourism sector of Dubai has emerged as an important contributor to the economic growth of Dubai. Dubai has become one of the major tourist destinations within the map of global tourism.

Every year huge number of tourists from all over the world come to visit this city. Dubai has been attracting business people, shoppers as well as tourists on account of its status of being a politically and economically safe place and the increasing relevance of the region (Kumar, 2011; Dubai Chamber, 2014).

Current trend in tourism growth in Dubai

According to a report published by Dubai Department of Tourism and Commerce Marketing (Cited in Travel and Tourism News Middle East, 2010), the year of 2010 had experienced a huge growth in tourism in the emirate. For example, the first half of 2010 had registered a growth of 9 percent in the number of hotel guests compared to that during the first half of 2009. According to a report of Dubai Chamber published in 2014, the year 2012 had experienced an annual growth of around 17 percent in the hotel and restaurants sector of Dubai thereby making this sector the highest growing sector of Dubai’s economy (Dubai Chamber, 2014). Till now, the tourism sector of Dubai has been maintaining the growth momentum in its tourism sector. According to a recent report published in ZAWYA in the web portal of HSBC Global Connections, the first half of 2014 registered significant growth in the hospitality sector of Dubai. The number of visitors during the first half of 2014 stood at 5.8 million, while the number was 5.5 million during the first half of 2013. There has been steady growth in hotel sectors with 6.7 percent increase in the number of hotels and 4.2 percent increase in the number of hotel apartments in the first half of 2014 while comparing with the first half of 2013. Another interesting point made by Department of Tourism and Commerce Marketing (Cited in ZAWYA , 2014) was that increase in the length of stay of visitors has been one of the major drivers of tourism growth in Dubai.

Along with growth in hotels and hotel apartments, average room rate has also shot up in Dubai. During the first five months of 2014, average room rate in Dubai was around US$305 which had been US$296 during the first five months of 2013 (ZAWYA , 2014). The occupancy rates in hotels have also been amazing in the recent time with the first six months of 2014 recording an occupancy rate of 85 percent (ZAWYA , 2014).

Factors driving tourism growth in Dubai

Given the rising trend of growth in the tourism sector of Dubai, it would be really interesting to figure out the factors that have contributed to the growth of tourism sector in Dubai.

One of the major factors behind the growth in tourism is the growth of population in UAE as well as in the entire GCC region that has been contributing to the rise in inter-regional travel within the GCC (Oates, 2014).

Given the declining reserves of oil, the UAE government has now been increasingly focusing on other sectors for having sustainable economic growth in future, such as in tourism sector (World Travel & Tourism Council, 2012). For example, in these efforts, the UAE government is expected to make an investment of more than US $300 billion in tourism related infrastructure (Oates, 2014; World Travel & Tourism Council, 2012). The improved infrastructure of UAE has been able to attract more tourists to Dubai.

Dubai has been trying to become the connecting node between Asia and South America that will significantly affect mobility on a global scale and thus will also contribute to further rise in tourism in Dubai (Oates, 2014). In this context, the Gateway effect can be considered to be a major factor behind tourism growth in Dubai. The GCC, mainly Dubai has emerged as a gateway to the US and South American countries as well as is fast becoming a new gateway for African nations to Asian passengers. Thus, Dubai has been experiencing a huge stopover traffic that has also been contributing to the growth in the hospitality sector of Dubai.

Future of tourism in Dubai

Looking at the current trend and the factors affecting tourism growth in Dubai, it seems that the tourism sector will continue to grow significantly in future as well. According to a report published by Dubai Chamber (2014), the travel and tourism sector of UAE is predicted to experience an annual growth of 4.1 percent with Dubai being the main destination of travel in the country. Given the rising importance of tourism sector in this region, Dubai Chamber also predicted a huge increase in capital investment in tourism sector as well that will further improve tourism related infrastructure and will thereby attract more visitors from all over the world in future. Another major driver of future growth in the tourism sector would be the Expo 2020 that will be held in Dubai. The UAE government is planning to make an investment of US$8 billion on infrastructure for hosting the event (ZAWYA, 2014). This kind of development in infrastructure is expected to further strengthen Dubai’s reputation as a premium tourist destination.

However, some downside risks should also be taken into account while talking about future growth of tourism in Dubai. For example, as pointed out by IMF (Cited in ZAWYA, 2014), some potential cost overruns at the time of infrastructure development mainly in the context of Expo 2020 in Dubai might bring in some distortions to macroeconomic stability of the region. Besides, some possible oversupply of property in the tourism sector also poses a risk to be taken into account. While concentrating on infrastructural development, the debt related issue should also be taken into account as increasing debt may significantly affect economic stability. Hence, the government needs to conduct a feasibility study before making huge investment mainly in the context of Expo 2020 by taking into account how Expo related infrastructural facilities would be used after the event. This can help in mitigating the risks and helping the tourism sector in a positive way.

References

Kumar, B.R. (2011). Tourism in Dubai: The Sunrise Sector. Middle East Journal of Business, Vol. 17, No. 1, pp. 15-16.

Travel and Tourism News Middle East. (2010). Dubai Continues growth as tourism hotspot. [online]. Available at HYPERLINK “http://www.ttnworldwide.com/Article/10335/Dubai_continues_growth_as_tourism_hotspot” http://www.ttnworldwide.com/Article/10335/Dubai_continues_growth_as_tourism_hotspot [Accessed 6th January, 2015].

Dubai Chamber. (May 5, 2014). Dubai Chamber analysis forecasts strong growth in UAE tourism sector. [online]. Available at HYPERLINK “http://www.dubaichamber.com/en/news/dubai-chamber-analysis-forecasts-strong-growth-in-uae-tourism-sector” http://www.dubaichamber.com/en/news/dubai-chamber-analysis-forecasts-strong-growth-in-uae-tourism-sector [Accessed 5th January, 2015].

World Travel & Tourism Council. (2012). Travel & Tourism Economic Impact 2012 United Arab Emirates. [online]. Available at HYPERLINK “http://wttc.org/site_media/uploads/downloads/united_arab_emirates2012.pdf” http://wttc.org/site_media/uploads/downloads/united_arab_emirates2012.pdf [Accessed on 4th January, 2015].

ZAWYA. (2014). Trend in Dubai Tourism Industry. [Online]. HSBC Global Connections. Available at HYPERLINK “https://globalconnections.hsbc.com/uae/en/articles/trends-dubais-tourism-industry” https://globalconnections.hsbc.com/uae/en/articles/trends-dubais-tourism-industry [Accessed on 6th January, 2015].

Oates, G. (2014). 5 Reasons Why Tourism is Poised to Explode in Dubai and Abu Dhabi. [Online]. Available at HYPERLINK “http://skift.com/2014/06/23/5-reasons-why-tourism-is-poised-to-explode-in-dubai-and-abu-dhabi/” http://skift.com/2014/06/23/5-reasons-why-tourism-is-poised-to-explode-in-dubai-and-abu-dhabi/[Accessed on 2nd January, 2015].