Local Business

Sharing economy will drive Dubai's tourism industry

Richard Stolz/dubai
Filed on April 24, 2017

Dance performers at the Indonesian pavilion at the Arabian Travel Market 2017in Dubai.
(Photo by Shihab)

A visitor takes a photo of the Sheikh Zayed Grand Mosque at the Abu Dhabi pavilion during the Arabian Travel Market in Dubai.
(Photo by Shihab)

Performers inside Sri Lanka's pavilion at the Arabian Travel Market in Dubai.
(Pjoto by Shihab)

Rise in price-conscious visitors from Asia will result in lower per capita spend

Sharing economy is not only a buzzword as was possibly considered years ago. Today's attributes of the sharing economy can be seen on a daily basis in all parts of the planet. These sharing economy trends, being introduced through firms as Airbnb and Uber, have also arrived in the GCC, having a particular impact on the UAE's tourism and travel industries.

For instance, let's look at Airbnb's impact on Dubai's hospitality sector. In 2016, Dubai's Department of Tourism and Commerce Marketing (Dubai Tourism) officially signed an agreement with Airbnb to regulate and further promote the idea of holiday homes in Dubai. By adding additional holiday homes to Dubai's existing supply of hotel rooms and managed hotel apartments market through Airbnb, business as well as leisure travellers enjoy a greater choice of options for booking accommodation.

Further, Airbnb homes can be attractive for price-sensitive business and leisure travellers as rates for serviced apartments and hotels often exceed rates of holiday homes - this is particularly so during key exhibitions and conferences in Dubai.

This trend of Dubai's future visitors becoming increasingly price-sensitive can be seen in recent statistics. Dubai's fastest-growing source market for tourists has been Asia with 22 per cent growth over the last three years compared to overall tourist growth of seven per cent.

It is expected that Dubai's future key tourism growth markets will be across Asia - in particular welcoming visitors from the Indian subcontinent as well as mainland China. A fair share of these travellers will be first time travellers to Dubai keen to explore landmarks as the Burj Khalifa, The Dubai Mall and the Burj Al Arab.

So, one could argue that the volume of tourists visiting Dubai will certainly increase in terms of tourist numbers passing through the city's immigration gates. However, it remains to be seen how tourist spend patterns will evolve over time with regards to the growing segment of first time travellers from South and East Asia. Most certainly, spend patterns might be more thinly spread.

Bearing in mind Dubai's additional entertainment options due to the increasing emergence of theme parks, it is likely that shopping malls and the overall retail sector will only account for a lesser percentage of overall spend of future tourists coming to Dubai.

These changing spend patterns related to price-sensitive tourist groups has already been picked up by Dubai's hospitality sector. In 2016 and over the next three to four years, both hotel developers and operators announced the opening of new mid-market hotels in the 3 to 4-star segment. Creating a bigger supply of good value-for-money hotels apart from the existing 5-star premium market also enhances Dubai's aim to extend the average length of stay per hotel guest from the current 3.6 nights per visit.

In conclusion, Dubai's tourism sector will further play a pivotal role for the local economy. But when targeting those anticipated 20 million tourists in 2020 compared to ca. 15 million in 2016, one has to note that tourist volume will grow at a faster level than tourist value. In simple words, Dubai's tourist numbers will go up but value (the actual spend per tourist) will grow at a slower rate. This should be considered by many players in the tourism and leisure sectors (hotels, F&B, retail, entertainment) when setting their strategic agenda and business cases for the years ahead.

The writer is the Head of Corporate Development at GRMC Advisory Services. Views expressed are his own and do not reflect the newspaper's policies.

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