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 KPMG’s 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.
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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