Dubai: Tourism continues to grow

Dubai’s tourism industry maintained its strong pace into May, with total visitor numbers reaching 6.2m in the first five months of the year. The May numbers mark a steady increase for fifth consecutive months and total visitors were almost three times as many as the same period last year and are now just 14% below pre-pandemic (2019) levels.

Tourism arrivals from Western Europe and GCC nations contributed to 23% and 22% of the total volumes respectively, the latter of which saw large increases from the year prior. Visitors from Oman and Saudi Arabia were up over 1000% and travellers from Kuwait increased by over 800%. The UK, France, Germany, Italy and the Netherlands were the biggest source markets from Europe, all of which saw dramatic increases from the year prior. On an individual country level India was the biggest source of visitors with 707,000.

The growing visitor numbers have been reflected in data from STR which show improvements in the hotel and hospitality sector. Hotel occupancy increased to 73.1% in May from 58.5% in May 2021, and RevPAR increased 46% y/y to AED 431 (USD 117) even as the supply of rooms grew 9% y/y. Hotel statistics are superior by almost every metric this year compared to the last, on the back of visitors attending Expo 2020 and well managed Covid-19 controls in place that boosted confidence and interest in the region.

Occupancy rate and revenue per available room, January to May

Source: STR, Emirates NBD Research

This data points to gradual and healthy growth across the board for the tourism industry. The overall number of visitors has seen a substantial increase compared to 2021 and while these figures do not quite match pre-pandemic levels (7.2m from January to May 2019) they are not too far behind and are expected to continue growing as the year progresses.

There are headwinds for the tourism sector in the second half of this year however, not least from higher US interest rates and the consequently stronger US dollar.  As the dirham is pegged to the dollar, Dubai becomes relatively more expensive particularly for visitors from emerging markets which constitute at least 50% of Dubai’s international visitors.  Visitors from other GCC countries (whose currencies are also dollar-linked) may also find Dubai more expensive relative to European and Asian destinations.

On the upside, the UAE hospitality sector is likely to benefit from the FIFA world cup later this year, with many football fans expected to base themselves in Dubai and Abu Dhabi for the tournament. The continued recovery of global air passenger traffic and eventual reopening of the Chinese market is also likely to support the tourism sector recovery in Dubai.