Dubai tourism and hospitality sector enjoys a strong H1 2022

Dubai’s tourism and hospitality sector continued its recovery in June, with more than double the number of international visitors to the emirate than in June 2021. In the first half of this year, 7.12mn people visited Dubai (staying at least one night), up 183% y/y but still around 15% below H1 2019 levels.

India remains the largest source market in the first half of this year, having been briefly displaced from the top spot in February by Saudi Arabia, with Oman in second place followed by Saudi Arabia and the UK. Pent-up demand in GCC states has resulted in a surge in visitors from within the region compared with H1 2021, when many travel restrictions were still in place. Russia is in fifth place, with 309k visitors in the first six months of the year. However, the number of visitors from Russia has declined since March, following the outbreak of the war in Ukraine.

International visitors to Dubai (monthly)

Source: Department of Economy and Tourism, Emirates NBD Research

Hotel occupancy declined to 63% in June from 73% in May, similar to last June’s occupancy rate.  For the first half of 2022, hotel occupancy averaged 73.5% in Dubai, only slightly below H1 2019 (75.1%) and a significant improvement on 2020 and 2021. Importantly, revenue per available room (RevPar) rose to USD 147 in H1 2022, 21% higher than H1 2019 despite a 22% increase in the number of hotel rooms in the emirate since then.

Dubai hotel occupancy and RevPAR (Jan-Jun)

Source: STR, Emirates NBD Research

The rebound in tourism to Dubai is in line with broader trends in international air passenger traffic this year, as global restrictions on travel have eased.  Data from IATA show that global air passenger volumes were just 30% below 2019 levels in June, having gradually recovered from mid-2020.  Asian markets have been relatively slow to recover, with international travel restrictions in key markets such as China still in place or easing only gradually. However, as these Asia Pacific markets do reopen for international travel, demand from these regions may help to offset the headwinds posed by higher inflation and borrowing costs in other markets. 

While tourism in Dubai in H2 is likely to be buoyed by the world cup in Qatar later this year, and the above-mentioned broader recovery in international travel, the strength of the dollar may prove a headwind for firms in the UAE. Around half of Dubai’s international visitors come from emerging markets where currencies have depreciated this year, making Dubai a relatively more expensive destination than Europe, the UK and Asia. High inflation and borrowing costs have also eroded purchasing power for consumers globally and may weigh on tourism demand in H2 2022.