Dubai Tourism: Robust growth in 2022

Visitor numbers in 2022 were just 14% below pre-pandemic levels

Dubai’s tourism and hospitality industry enjoyed a strong performance in 2022, with the total number of international visitors to the emirate reaching 14.36mn, almost double the 2021 total of 7.28mn. Whilst this figure is still around 14% lower than pre-pandemic levels of 2019 (16.73mn), it represents a substantial improvement over the past two years.

Tourist arrivals from Western Europe and GCC nations accounted for 21% of the total volume each, making up the largest source of visitors, with South Asia making up 17%. India was the largest source market, with Oman, Saudi Arabia, the UK, and Russia making up the rest of the top five. Visitors from India, Saudi Arabia and the UK did not match their 2019 numbers, but those from Russia were up 7% and those from Oman were up 27%. Oman has been the standout source country of 2022 – at one point overtaking both India and Saudi Arabia to be the biggest source of visitors, with a 369% increase from 2021.

The biggest outlier this year has been China as they have only recently reduced travel restrictions brought about by their zero-Covid strategy. China has consistently been placed in the top five source markets for Dubai over the past decade, but only 177,000 visitors travelled to the emirate in 2022. This figure is up 131% from 2021 but down -82% from 2019.

This uptick in visitor numbers coincides with international air traffic into the emirate. Dubai International Airport (DXB) reported an increase in passenger numbers of 127% from 2021 (up 66.1mn from 29.1mn). Airport traffic in the final quarter jumped 67% y/y, reaching a total of 19.7mn passengers, the busiest quarter since 2019 but still short of its pre-Covid capacity. Nevertheless, Dubai Airports CEO Paul Griffiths expects that 2019 levels could be matched by as early as mid-2024.

Dubai: International visitor numbers

Source: Department of Economy and Tourism, Emirates NBD Research

Hotels enjoyed strong pricing power in 2022

Hotel occupancy averaged 72.8% in 2022, only slightly lower than 2019 (75.6%) but a significant improvement from 2021 and 2020. The recovery in hotel occupancy was particularly impressive given the 17% increase in the supply of hotel rooms in Dubai since the end of 2019.  Revenue per available room (RevPar) rose to USD 137 in 2022 marking a 23% increase from 2019 and its highest level since 2017, despite the increased supply of rooms and thus reflecting the strength of demand.

Dubai: Hotel occupancy and RevPar

Source: Department of Economy and Tourism, Emirates NBD Research

Data for January 2023 indicate a strong start to this year for the hospitality sector in Dubai. Hotel occupancy rose to 80.5% last month, almost 10 percentage points higher than in January 2021, and RevPAR rose 5.7% y/y as well. The travel & tourism component of the Dubai PMI survey also points to an improvement in business conditions in the sector last month, with output and new work rising sharply. 

2023 Outlook

We have constructed a “tourist dirham index” which looks at the strength of the dirham relative to the currencies of key tourist source markets. We have updated this to reflect the 2022 composition of Dubai’s international visitors. The index shows that Dubai has become more expensive for international visitors, many of whom come from emerging markets where currencies have weakened significantly against the dollar over the last two years. With interest rates likely to rise further this year, we expect consumer spending to remain constrained, proving a headwind for the tourism sector in Dubai in 2023.

Emirates NBD's Tourist Dirham Index

Source: Emirates NBD Research

On the positive side, we expect visitor numbers from China to rebound sharply this year as Covid19 restrictions have been eased and there is significant pent-up demand in this important market. We expect the rebound in tourism from China to help mitigate potential softness in some other key source markets.

More broadly, global air passenger traffic volumes remain below 2019 levels according to data from IATA, and the gradual recovery in international aviation is expected to continue in 2023. Given Dubai’s position as a global travel hub, a sustained rebound in international travel will likely also support the emirate’s tourism and hospitality sector this year, particularly if hotels are willing to offer incentives and discounts to offset some of the recent currency appreciation.