Dubai Tourism: Green shoots

The tourism sector is at the forefront of industries impacted by the pandemic. As the virus evolves into second and third waves, global travel restrictions continue to gyrate along a wide spectrum of differing restrictions, further hampering the sector’s recovery. While the rollout of vaccines has started in many countries, it will take several months before enough people have been vaccinated to curb the spread of more contagious strains of the virus, and allow restrictions on movement to be eased.   

Dubai’s tourism sector has felt the full impact of the pandemic, with the UAE’s borders closed from late March and only re-opening on 7 July. While visitor numbers have started to recover, reaching 1.11mn in between July and November, this is around 83% lower than the number of international visitors to Dubai over the same period in 2019.  The decline is broadly in line with the 88% y/y drop in international air passenger traffic reported by IATA in September and October.

South Asia was the largest source region for visitors at 37%, followed by Western Europe and MENA regions at 15% each, while Russia CIS and Eastern Europe accounted for 10% of visitors. India, Pakistan, Egypt, UK, France were the top 5 source markets by country visiting the emirate, with Saudi Arabia – usually in second place behind India – still limiting unnecessary international travel for its residents during the period.

Dubai visitors by country (July - November 2020)

Source: Dubai Tourism, Emirates NBD Research

Unsurprisingly given the sharp decline in the number of international visitors, hotel occupancy and revenue per available room (RevPAR) in Dubai have been much lower in 2020 relative to prior years. According to data from STR global, hotel occupancy rates have declined from 74% to 46.6%, when comparing Jan-Nov data of 2019 and 2020 respectively.  RevPAR also dropped sharply, as hotels had to offer significant price discounts to attract customers, initially domestic “staycationers”, then at a later stage international tourists who started trickling in after border restrictions in the UAE where removed in July. Data from STR global also showed RevPAR almost halving from USD 108 in Jan-Nov 2019 to USD 56 in Jan-Nov 2020.

Dubai hotel occupancy and RevPAR (Jan-Nov)

Source: STR Global, Emirates NBD Research

We expect the recovery in international visitor numbers to have continued through December. The measures the UAE has put in place to contain the spread of the coronavirus have allowed the economy to remain open even as lockdowns have been re-imposed in Europe, the UK, parts of Asia and the United States, making it an attractive destination for those still willing and able to travel. 

The emirate also continues to benefit from a higher than usual number of residents “staycationing” due to travel restrictions elsewhere, or simply a reluctance to travel abroad during a pandemic.  The normalising of relations with Israel allowed direct flights to commence between the UAE and Israel in December and estimated 50,000 Israeli tourists have reportedly visited the UAE since. 

Looking ahead, the rollout of Covid-19 vaccines will take several months, but we expect restrictions in developed economies to be eased significantly by the end of Q1 2021. Expo 2020 is scheduled to start in October 2021 and this should provide a further boost for the domestic tourism market this year. While international travel will likely take much longer to fully recover to pre-pandemic levels – possibly years – we do expect solid y/y growth in the sector this year off the low 2020 base.