On the up: The government provides strong administrative and financial backing

Identified as a key economic diversification driver in the Abu Dhabi Economic Vision 2030, according to Reem Al Hashimi, the UAE minister of state, the tourism sector contributes 14% of the UAE’s GDP and provides around one in nine jobs. While keen to expand and promote its tourism offering to maximise economic benefits, Abu Dhabi is taking a deliberate approach to ensuring that the industry’s growth also provides social benefits. Having tourism contribute towards, rather than come at the expense of, the preservation of tradition and heritage is a key goal, while culture also forms a core component that the emirate proactively showcases to the world.

On The Up

 Figures from Abu Dhabi Tourism & Culture Authority (TCA Abu Dhabi) show a 13% rise in 2012 over the previous year in terms of hotel guests staying in the emirate. This trend is expected to continue as a pipeline of new facilities to capture the corporate and conference markets, as well as fresh attractions to increase the capital’s appeal as a leisure destination, come on-stream. Expansion of Abu Dhabi International Airport, as well as new routes and strategic alliances secured by the national carrier, are also boosting the emirate’s connectivity and its capacity to handle more arrivals. Furthermore, promotional campaigns aimed at both traditional and emerging source markets are being launched to entice guests to stay longer and spend more.

Due to a stream of openings, hotel operators are facing pressure on occupancy levels amid falling room rates. While the emirate could stand to benefit from greater diversification of its hotel mix away from the current concentration at the high end to better reflect the changing composition of its visitor segments, over time supply and demand should normalise and the long-term prospects for the hospitality trade remain strong.

“The hotel sector could benefit from a more diversified product portfolio, as mid-market product remains somewhat undersupplied. We also anticipate greater demand for boutique hotels which offer individualised services,” Nehme Darwiche, the CEO of Jannah Hotels and Resorts, told OBG.

By The Numbers

According to the UN World Tourism Organisation, the UAE has surpassed Egypt as the Arab world’s leading tourism destination in terms of tourism receipts, accumulating around $10bn in earnings during 2012. The World Travel and Tourism Council reports that investment spend on travel and tourism in the UAE makes up 41% of the Middle East’s total and is growing at 7% per year. Just under a quarter (23%) of the UAE’s total investment in 2012 was directed towards the sector, illustrating the prominence of tourism development in the country’s diversification efforts.

Considering that visitors arriving by air might not have made Abu Dhabi International Airport their point of arrival in the UAE, perhaps landing in Dubai instead, and that overland travellers might have crossed into the UAE at any number of border posts, monitoring arrivals as a means of accurately tabulating visitor numbers presents a challenge. Instead, TCA Abu Dhabi, as the government entity overseeing the sector and tracking its performance, uses the number of guests at registered hotels or hotel apartments as a proxy for evaluating industry performance. Accordingly, numbers could be considered to be on the conservative side, as the methodology does not factor in day visitors, nor does it capture those opting to stay with friends or family.

Abu Dhabi hosted 2.39m hotel guests in 2012, a 13% rise on 2011, according to TCA Abu Dhabi. Having received 2.27m guests from January to October 2013, the emirate is on track to reach the 2.5m target for the year. September to December is peak season as the weather cools and a number of events remain on the calendar, including the F1 Etihad Airways Abu Dhabi Grand Prix, Abu Dhabi Air Expo, Al Ain Aerobatic Show and the Abu Dhabi HSBC Golf Championship. The emirate’s goal is to have guest numbers grow threefold to 8m by 2030. Not only are more guests arriving, they are staying longer. As of October 2013 there had been a 26% year-on-year (y-o-y) rise in guest nights to 7.08m, thanks to a 9% increase in the average length of stay to 3.12 days.

Hotel Capacity 

Hotel supply is expanding even faster, with a 16% increase in the number of rooms available leading to a fall in average occupancy and room rates. While TCA Abu Dhabi figures reveal that occupancy levels dipped 5% y-o-y to 65%, and the average room rate fell by 8% to Dh452.90 ($123) over 2012, hotels appear to be finding other means of generating returns, with year-to-date room revenues for October 2013 up 22%, supported by food and beverage receipts, which rose by 18%.

Over the past nine years the emirate has seen a 175% rise in the number of hotels and a 210% increase in rooms available, according to TCA Abu Dhabi, albeit from a low base. Rather than a cause for panic, falling room rates could be seen as a necessary correction, bringing prices into a more accessible range, where the sector was “under-hotelled” in the past. In a 2009 report by UK-based Hogg Robinson Group, Abu Dhabi came second behind Moscow in a ranking of the world’s most expensive cities for business travellers. Yet in the June 2013 report, an average room rate of $226 has it in 36th place, making a business stay in the emirate more affordable than in Dubai (18th) and other meetings, incentives, conferences and exhibitions (MICE) destinations such as Sydney (8th) and Singapore (15th).

According to real estate service firm Jones Lang LaSalle, while a number of recently started tourism mega-projects such as Saadiyat and Yas Island are strong long-term demand drivers, as these will likely take time to materialise, the new supply hitting the market should result in the hotel sector remaining subdued for the immediate future. Saadiyat Island is set to feature local versions of two of the world’s most renowned museums, the Louvre and the Guggenheim, anchored by the Zayed National Museum as the district’s centrepiece (see analysis).


 In 2012 two-star (75%) and three-star (70%) hotels had the highest occupancy rates, with four- and five-star hotels on 68% and 60%, respectively. The luxury segment is projected to remain congested, with a number of international brands, including the St. Regis, Ritz-Carlton and Hilton, launching new properties in 2013 and joining the Emirates Palace, Shangri-La, Fairmont, Intercontinental, Aloft, Yas Viceroy Hotel and Dusit Thani among Abu Dhabi’s 33 five-star establishments.

“Hotel inventory is tilted towards five stars. So we are trying to beef up demand for existing capacity and add more two- and three-grade properties to the mix. We are also considering introducing an incentive scheme to encourage more three- and four-star properties,” Mohammed Al Dhaheri, director of strategy and policy for TCA Abu Dhabi, told OBG. At present, all developers of hotel projects in the emirate are required to apply for a licence from TCA Abu Dhabi, at which point the authorities inform them of the current market dynamics.

Source Markets

 The shift in demand towards mid-tier accommodation is also a reflection of the changing composition of the emirate’s main source markets, with large spikes – albeit from lower bases – in visitor numbers coming from emerging outbound destinations such as India, China and Russia, which are showing much higher y-o-y volume increases than the steadier, single-digit growth from the more traditional European and North American source markets. According to a May 2012 report by the Statistics Centre - Abu Dhabi (SCAD), in 2010-11 guests from Europe displayed a stronger propensity to stay in higher-grade hotels, with 45% staying in five-star offerings, while Asian guests (excluding Arab countries) demonstrated a preference for three stars or less (30.2%) over five-star options (20.7%).

Other emirates are the largest source market for Abu Dhabi, making up over one-third (888,241) of the 2.3m recorded guests in 2012. With a 28% year-to-date increase as of October 2013, UAE nationals anchor the sector’s prospects. This may be partly down to unrest in Middle East destinations where Emiratis commonly holiday motivating more stay-at-home vacations. Through investments in new attractions that appeal to nationals, such as Yas Waterworld and the opening of shopping centres in conjunction with heavily promoted shopping festivals, Abu Dhabi is increasingly able to capture a greater share of domestic leisure spend.

Over the course of 2013, India surpassed the UK as Abu Dhabi’s largest international source market. It is likely to retain this position following TCA Abu Dhabi’s opening of an office in New Delhi in 2012, where its promotional efforts include a nationwide campaign in partnership with travel company TUI, aimed at attracting outbound business and leisure travellers. A 24% equity stake purchase by Etihad in India’s second-largest airline, Jet Airways, will enhance air access to the subcontinent, and with the Indian carrier now likely to establish a Middle East hub in Abu Dhabi, this should also lead to greater stop-over traffic. “The growth of the hospitality sector will be significantly aided by Etihad Airways’ continued growth as it opens additional routes to new corners of the globe,” Darwiche told OBG.

Orient Express

Asia’s other powerhouse, China, is only the 14th-largest source market for Abu Dhabi. However, this position must be considered in context as China’s government only began allowing travel agencies to send tour groups to the UAE in 2009. China is the world’s largest and fastest-growing outbound travel market, and TCA Abu Dhabi, recognising this potential, is ramping up its marketing efforts. In September 2013 it organised a Chinese Visitor Summit, which it hosted 75 of the country’s leading destination marketing companies.

The emirate’s hotels now employ more than 100 Mandarin- and Cantonese-speaking staff, and many have been running special “Chinese New Year” and “Golden Week” holiday packages. New alliance and code share partnerships formed between Etihad Airways and Air Seychelles, as well as Hainan Airlines, are resulting in more frequent flights serving cities such as Hong Kong, Beijing, Shanghai and Chengdu.

The travel and hospitality industry’s efforts appear to be bearing fruit, with year-to-date Chinese guest numbers up 45% to October 2013 year-on-year, according to TCA Abu Dhabi. According to Visa, 85% of Chinese visitors’ spend in the UAE in 2012 was on shopping, entertainment and accommodation.

Russians are another group visiting the emirate in increasing volumes. TCA Abu Dhabi market research indicates that their motivation for visiting tends to be more leisure than business, which bodes well in terms of length of stay and spend per visit.

“As the leisure segment grows, hoteliers will experience higher average daily rates as their businesses become less dependent on both discounting and lower-yielding business segments,” Craig McIntyre, chief operating officer at Miral, told OBG.

Air Power

 The UAE’s flag carrier Etihad Airways, which operates out of Abu Dhabi, has been one of the world’s most active airlines in recent years. The airline’s growth is supplemented by code share partnerships and the purchase of minority equity stakes in airlines. Etihad Airways handled nearly 12m passengers in 2013, an increase of almost 16% on the previous year, and has emerged as the Middle East’s fourth-largest carrier. Its equity alliance currently includes Germany’s airberlin, India’s Jet Airways, Ireland’s Aer Lingus, Virgin Australia, Air Seychelles, Switzerland’s Darwin Airline and Air Serbia. Serving 102 destinations in 60 countries, and strategically positioned to serve as a transit hub for passengers crossing continents, Etihad Airways plays a key role in supporting tourism. It promotes the emirate as a stop-over destination by running offers that give passengers who transit via Abu Dhabi free hotel nights and discounts on desert safaris and tours.


 To keep pace with the carrier’s rapid network expansion and facilitate more global airlines, Abu Dhabi International Airport is undergoing an expansion programme, targeting an additional capacity of 30m passengers by 2017. Abu Dhabi is only a 90-minute drive from Dubai International Airport, which is among the world’s 10 busiest. This proximity affords an opportunity to be leveraged rather than posing direct competition, as the capital benefits from having two gateway international airports which arriving passengers can access. Both Etihad Airways and Emirates (Dubai’s main carrier), recognising that it is common for international visitors to move between the two emirates, offer a free shuttle service between their respective airports and the other cities’ main attractions.

A Place To Meet

 A study commissioned by Abu Dhabi National Exhibitions Company (ADNEC), the emirate’s flagship, government-owned 133,000-sq-metre meeting facility, predicts that the economic impact from business events hosted in Abu Dhabi will increase by around 7% per annum until 2020.

The emirate’s burgeoning MICE segment had a milestone year in 2012, as Abu Dhabi climbed 134 places to become only the second Arabian city – after neighbouring Dubai – to make it into the top 100 of the International Congress and Convention Association’s global city listings.

The Abu Dhabi Convention Bureau, which was formed in March 2013 as a spin-off from TCA Abu Dhabi tasked with the promotion and facilitation of business events tourism, is targeting a top 50 ranking within five years. “The annual list is accepted as the industry benchmark, and provides an endorsement and reference point for major conference organisers seeking new alternatives,” said Al Dhaheri.

The rankings are determined by the total number of association meetings that are held per year, and demonstrating a track record of being able to host large-scale events – particularly repeat ones – makes winning new business easier.

In selecting the conferences and exhibitions to bid for, the main criteria are the event’s economic impact and its alignment with Economic Vision 2030. Al Dhaheri cited the World Ophthalmology Congress as an example of an event that brought in large delegate numbers and spend, but also fitted the emirate’s broader development aims, as advancing health care is one of the pillars of Economic Vision 2030.

Many of the major global conferences that rotate locations annually are bid for years in advance, there by resulting in a lag until the economic impact is felt. Recognising this, the Convention Bureau oversees Advantage Abu Dhabi, a programme focused on securing a recurring stream of moderate-sized events that can be shared among the many hotels with suitable facilities and other purpose-built conference venues throughout the city. Launched in 2009, the initiative offers incentives for organisers to choose from, such as free tour and entertainment packages, based on the number of total paid room nights their event will contribute. This could also help address the issue of seasonality, which is a challenge for business-oriented hotels. “Most of the large events are in the winter months, and in summer hotels reliant on event trade try to outbid each other for guests. A better spread of events through the year will help even things out, as room rates for business hotels in winter can be 10 times higher than in the summer,” Majid Rasheeduddin, a manager at Premier Inn Abu Dhabi Capital Centre, told OBG.


Abu Dhabi has a number of attributes that make it an appealing destination, including cultural assets, ease of connectivity and a sense of security. Yet for industry participants and investors, what perhaps holds the most appeal is the high level of administrative and financial government support afforded to the tourism industry. This allows hoteliers to receive new licences in a streamlined process; event organisers to tap into a range of incentives and logistical support from the Convention Bureau; attraction owners to accompany TCA Abu Dhabi to trade fairs to promote their product; and travel agents to co-package holidays with Etihad.

The emirate’s long-term tourism ambitions, centred on the goal of hosting 8m guests per year by 2030, are certainly lofty. Between now and then there are likely to be mismatches between supply and demand as the infrastructure to handle visitors, in the form of accommodation and transportation, comes on-line at a different pace to the attractions aimed at enticing them. It has been demonstrated that as the emirate unveils new developments – recent examples being ADNEC, Ferrari World and Yas Waterworld – more guests arrive and stay longer. With a slate of anchor attractions set for staged openings over the coming years, numbers should continue to grow as Abu Dhabi gains greater prominence in the international tourism market.

While mega-project island developments receive the most attention, existing assets are continually being revamped to bolster appeal to international visitors and local residents alike. Examples include a soon-to-be issued tender by Abu Dhabi Municipality to transform the city’s Corniche area and a project by Abu Dhabi Ports Company to redevelop the port into a dock for cruise ships. The emirate is also investing in positioning itself as a regional centre of excellence in fields such as health and education, the establishment of renowned anchor institutions – such as the Cleveland Clinic, the Sorbonne, INSEAD and New York Film Academy – presents the opportunity for TCA Abu Dhabi to launch strategies aimed at health and education tourism at a later stage.

“The development of the tourism industry now involves a more coordinated effort among all stakeholders, including hotel operators, tour operators and airlines. With so many existing attractions and new ones being developed, there is a growing opportunity to create packaged deals and incentives as a way of attracting visitors to the emirate,” Ziad Hourani, the chief executive officer of Miral, told OBG.


You have reached the limit of premium articles you can view for free. 

Choose from the options below to purchase print or digital editions of our Reports. You can also purchase a website subscription giving you unlimited access to all of our Reports online for 12 months.

If you have already purchased this Report or have a website subscription, please login to continue.

The Report: Abu Dhabi 2014

Tourism & Culture chapter from The Report: Abu Dhabi 2014

Cover of The Report: Abu Dhabi 2014

The Report

This article is from the Tourism & Culture chapter of The Report: Abu Dhabi 2014. Explore other chapters from this report.

Covid-19 Economic Impact Assessments

Stay updated on how some of the world’s most promising markets are being affected by the Covid-19 pandemic, and what actions governments and private businesses are taking to mitigate challenges and ensure their long-term growth story continues.

Register now and also receive a complimentary 2-month licence to the OBG Research Terminal.

Register Here×

Product successfully added to shopping cart