Expert’s Voice: How is Dubai’s hospitality and tourism industry maturing?

Dubai’s glittering skyline seeing a shift towards the
mid-market hotel segment? (Photo: Daniel Cheong
photography)

R. Stolz, Associate Director at Global Strategy Group, shares
his insight into new source markets for hotels in Dubai, and
explains how the city’s shift towards the mid-market segment.

Over the last two decades, Dubai has managed to become a global
hub for travel and tourism, emerging as a top destination. The city
attracts a spectrum of leisure and business visitors, offering
guests a multifaceted experience—from beaches to desert to luxury
hotels to shopping and entertainment, as well as a thriving
business centre.

Considering tourism in the UAE as a whole, it becomes evident
that Dubai is the leading destination, with approximately 15.9
million international travellers visiting the emirate in 2018. The
city accounts for 74% of all international visitors coming to the
UAE with 21.3 million international visitors having travelled to
the UAE in 2018. Compared to Dubai, Abu Dhabi accounts for 11% of
international tourist arrivals, Sharjah 9% and Ras Al Khaimah 3%,
respectively.

With Expo 2020 Dubai around the corner, international tourist
arrivals to the emirate are expected to grow further, albeit
initial forecasts on expected visitor volumes have softened since
Dubai was awarded host city for the mega event in 2013. Still, Expo
2020 is one of the most anticipated events in the regional tourism
calendar and it is expected to have a positive impact on the local
economy.

DUBAI: UAE’S POWERHOUSE

In terms of hotel establishments, the city operates as the
country’s powerhouse. In 2018, Dubai was home to 716 hotels
offering almost 116,000 keys. Furthermore, average hotel occupancy
in the same year was 76% (compared to 79% in 2014) with an average
stay of 3.5 days per visit (versus 2.6 days in Abu Dhabi).

After two decades of tremendous growth, adding supply capacity
to Dubai’s landscape (i.e., hotels, entertainment, retail and
theme park attractions) one might argue that the local tourism and
hospitality sector reached a certain level of maturity with
specific consideration given to the shift in tourist profiles
visiting the city.

EMERGING SOURCE MARKETS

Historically, countries such as India, KSA and Western Europe
(primarily the UK) were key source markets for Dubai. Examining
traveller profiles between the late 90s through the mid-2000’s, a
large share of Dubai’s visitors were categorized by a high spend
per capita per visit fuelling the city with sufficient
purchasing/buying power. Over recent years these patterns seem to
be shifting to include an increasing component of mid-market
tourism segments flocking to the city.

The Chinese travel segment has experienced the highest growth
rate, with a compound annual growth rate (CAGR) of 25% from
2014-2018, followed by Russia with a CAGR of 13% for the same
period. In total numbers 857,000 Chinese tourists visited Dubai in
2018. This number is set to grow to 1.27 million in 2023 with a
CAGR of 8%. A similar pattern can be seen for the Russian
market—678,000 visitors in 2018 and 1.6 million expected in 2023
(CAGR of 12%).

Certain key factors drive growth from emerging source
markets:

  • Relaxed visa requirements, such as visa on arrival for Chinese
    and Russian nationals
  • Introduction of additional and direct airline routes to Russia
    and China
  • A government initiative called ‘Hala China’ which is aimed
    at exploring opportunities to attract Chinese visitors

Nevertheless, India still remains one of Dubai’s strongest
source markets with slightly more than 2 million visits in 2018 and
a CAGR of 12% (2014-2018).

Taking these aspects into account, one could argue that tourist
profiles are shifting.

Compared to 10-15 years ago, when tourists tended to be affluent
with substantial spending power, today’s visitor profiles and
spending patterns increasingly lean toward the mid-market segment.
As indicated, it is expected that Dubai’s future key tourism
growth markets will be shifting towards the East – in particular
welcoming visitors from the Indian subcontinent, China and Russia
(including the wider CIS). A fair share of these travellers will be
first-time travellers to Dubai, keen to explore landmarks such as
Burj Khalifa, Dubai
Mall, The Palm and Burj
Al Arab
.

WHAT HOSPITALITY PLAYERS SHOULD KNOW

Given the shift in demographics, one could argue that while the
actual volume of tourists visiting Dubai will certainly increase,
it remains to be seen how tourist spend patterns will evolve over
time with regards to the growing segment of first-time travellers
visiting the city. Spending may well be more thinly spread across
the vast supply of tourism & hospitality offerings that emerged
in the city over recent years.

Going forward, with current and future hotel, retail and
entertainment offerings in mind, the emirate may need to monitor
and manage its supply and demand effectively. A risk of oversupply
in hospitality and tourism offerings with softening demand in the
short- to medium-term is certainly a scenario to be avoided.
Dubai’s tourist numbers will go up but value (the actual spend
per tourist) is likely to grow at a slower rate. This should be
considered by players in the hospitality and tourism sector when
setting the agenda for the years ahead.

Richard
Stolz
was a delegate and keynote presenter at TOPHOTELWORLDTOUR
Dubai 2019. To attend, address or sponsor our boutique hospitality
networking events around the world, contact TOPHOTELPROJECTS Head
of Global Events & Conferences Kayley van der
Velde
.

Richard Stolz
Richard Stolz

Associate Director – Global Strategy Group

Richard is an Associate Director in KPMG’s Global Strategy Group
based in Dubai. He is an experienced strategy consulting
professional, passionate about developing & helping
organizations grow in tourism and hospitality among other sectors.
His functional background is in corporate strategy, business
development & growth.

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Source: FS – All-Hotels-Blogs
Expert’s Voice: How is Dubai’s hospitality and tourism industry maturing?