Tourism is cementing its position as one of the leaders of Dubai’s economic recovery from the global recession, as a burgeoning holiday trade leads to growing numbers of tourist arrivals that help to fill the new hotels. Lingering uncertainty in the wider market, however, could give pause to rapid hotel development.
The industry has posted strong numbers so far this year, with arrivals, room occupancy and time of stay totals all up on the 2011 figures. Data issued by the Department of Tourism and Commerce Marketing (DTCM) at the beginning of October showed more than 5m guests checked into the emirate’s hotels in the first half of the year, a 10% improvement on the performance in the opening six months of 2011.
Even more significantly for the rest of the tourism and hospitality industry, those guests were staying longer and bringing in more revenue, according to the DTCM’s director general, Khalid bin Sulayem.
“Guest nights of Dubai hotel facilities amounted to 19.2m in the first half of this year, an increase of 18% against first-half 2011,” he said during a tourism congress on October 1. “Likewise, revenues of both Dubai hotels and hotel apartments in the first six months of the year amounted to $2.66bn, a rise of 22% in comparison to the same period in 2011.”
These improved figures suggest that tourism is starting to fulfil the objectives set for it in Dubai’s medium-term development plans, which envisage the industry becoming one of the main pillars of the economy. A recent report by Standard Chartered Bank said that tourism, along with trade and services, was one of the sectors driving the economy forward, with this momentum likely to be maintained through the rest of this year and beyond.
Standard Chartered analyst Shady Shaher says that the tourism sector is benefitting from the emirate’s stability in light of ongoing challenges in the region, benefits that are flowing back into the economy. “In 2012 we expect total tourist arrivals into Dubai to grow by 11% year-on-year to 10m, with hotel occupancy rates likely to improve to 87%,” he said on October 9. “A growing stock of hotel rooms should cap room rates, ensuring a steady flow of tourists to the emirate. We expect GCC tourists to be one of the largest growth segments into the year end.”
But while recent events in the region certainly have contributed to the sector’s growth, they do not explain the whole story, Sulayem told OBG. “While the Arab Spring has contributed positively to the tourism sector, it would be incorrect to solely attribute our growth to that phenomenon. Current and future growth of tourism in Dubai will more broadly depend on our ability to diversify the segment, both in terms of product offering and marketing strategy,” Sulayem said.
Looking further down the track, next year could see more measured growth for the hospitality component of the industry, with new hotel openings having the potential to dilute occupancy rates. In 2012 the number of hotel rooms in the market has increased by 8.3%, reaching 58,750 rooms, Gerald Lawless, the president and CEO of Jumeirah Group, told OBG.
According to Peter Goddard, the managing director of TRI Hospitality Consulting in Dubai, there are a number of new top-end hotels set to open their doors in 2013, which will drain off some of the flow of visitors to existing establishments. “The outlook for hotels in Dubai into 2013 appears to be buoyant, albeit with a relatively stable or marginally reduced occupancy levels due to the anticipated increase in supply,” he told Gulf News in late September. “The recent recovery in Dubai’s tourism and hotel demand and a renewed confidence in its real estate and other growth sectors appear to be encouraging developers to restart planned or stalled developments.”
The trick for the industry will be to maintain this steady growth without giving way to excesses such as bringing too much new accommodation stock onto the market in the short term. A managed approach, one that takes into account the more immediate impact of a potential second bout of economic crisis stemming from Europe, would keep supply and demand in balance. Bringing too many new rooms on line too quickly could push room rates down, negating the advantage of higher arrival numbers.