Analyse of the sector 07/12/2010
Crisis-ridden 2009

In 2009, GDP growth fell, real estate companies made substantial losses, consumer confidence declined and what used to be the land of opportunity, especially for Arabs and residents of the region, seemed to lose control. Tourism figures varied greatly in terms of growth rates, arrivals from Europe grew very slowly or often declined as the UAE’s largest source market, the UK was badly damaged by the crisis. Many projects were cancelled and those that were not, were postponed. However, despite the gloom, the UAE generally managed to survive the crisis better than its European counterparts, and certainly much better than many thought it would. Government subsidies poured in to save the country’s largest corporations and tourism growth remained positive.

 

Optimism for tourism’s future

 

Hotels were the hardest hit in 2009, with occupancy rates falling to their lowest levels in years, especially in Dubai. A vast majority of these hotels offered attractive discounts and promotions in order to survive the crisis, encouraged and supported by the Department of Tourism and Commerce Marketing (DTCM) and the Abu Dhabi Tourism Department (ADTA) as well as other tourism offices in the other Emirates. However, none of these hotels have divested from the UAE, and instead, large groups such as the Intercontinental, Hilton Hotels and Jumeirah still have many projects in the pipeline, based on a common belief that despite all the problems, the best is yet to come for the UAE’s tourism industry.

 

Abu Dhabi rides out the storm

 

One of the jewels in the crown in 2009 was Abu Dhabi. Amidst a crisis-ridden year, and despite considerable pessimism surrounding the tourism in the UAE in general, Abu Dhabi pressed ahead with more developments and had a strong year. Abu Dhabi started showcasing its outstanding new development, the Yas Island, which is set to be its major attraction for years to come, and all eyes were on the Emirates when it hosted Formula 1 on 1 November 2009 at the Yas Marina Circuit. This really put Abu Dhabi on the world map, as international media groups came to broadcast live from the country, and the hefty investments and efforts that made this massive new development possible were praised around the world.

 

Low cost airlines weather the storm

 

2009 saw the entry of a new low cost airline to the UAE, Dubai’s first low cost airline and the UAE’s second. Flydubai launched operations in June 2009, entering the market with highly competitive prices of as little as US$50 to Beirut and Damascus. The airline reported 100% utilisation in the first months and very strong demand, despite the timing of the launch which came during the economic crisis. Amidst a suffering global air travel market, Air Arabia continued to report strong growth in revenues and profits. Low cost airlines are now growing from a low base in the region, which should now give an advantage to all early movers.

 

Intra-regional haven

 

While the global economic downturn has had a very strong negative impact on the West, the Middle East has performed a lot better. Growth remained positive and consumer confidence, although on the decline, was still higher than in the West. As such, residents of the region remained more likely to travel, although trips were of shorter distances to cheaper destinations, which ruled Europe out. Short breaks in neighbouring cities became popular and intra-regional traffic remained healthy. This meant that outbound travel to regional destinations continued to grow and inbound tourism from regional markets was also on the rise. The UAE may in fact increasingly focus on regional countries as source countries for tourism as these have shown more resilience in the face of economic crisis, while intra-regional business is also set to continue thriving.