United Arab Emirates Tourism Report Q1 2009

Tourism Overview Recent data suggest continuing favourable conditions in the tourism sector in the UAE as a whole. The latest data for Q208 in Dubai show that hotel establishments recorded a relatively strong increase of nearly 9% year-on-year (y-o-y) in the number of tourist arrivals. Based on revised data, the growth rate in the second quarter of 2008 is somewhat stronger than that achieved in Q108 (5.3% y-o-y). Additionally, in Sharjah, the number of tourists staying at hotels was up a strong 13% y-o-y in the first nine months of 2008, with close to 1.2mn arrivals.

Forecast Scenario Although there are additional data this quarter, BMI’s estimated growth rate for visitors to the UAE in 2008 remains unchanged at around 7% y-o-y, which represents a moderate slowdown on growth in 2007.

In 2009, however, we expect growth to slow sharply (revised down slightly to 3% y-o-y). A recovery in the growth in tourist arrivals is anticipated in 2010, while annual average growth should remain favourable at about 5% y-o-y during the extended forecast period to 2013. The outlook for tourism over the next few years is largely underpinned by deteriorating global macroeconomic conditions, with downward revisions this quarter to BMI’s forecasts for the US and key European economies – which together accounted for an estimated 40% of total arrivals to the UAE in 2007.

Hospitality In Dubai, the most recent data for Q208 show hotel establishments registered a strong 8.7% y-o-y increase in the number of guests to nearly 1.5mn, compared with close to 1.4mn in the corresponding quarter of the previous year. The number of guest nights during the same period, meanwhile, was up a massive 20% y-o-y at 4.4mn from about 3.7mn in Q207. In line with a marked rise in guest nights, hotel establishments registered a buoyant 26.8% y-o-y growth in revenues to over AED3.7bn during Q208, compared with around AED2.9bn in Q207. The average occupancy rate (beds) at Dubai hotels also remained particularly high, at 78.9% in Q208, up from 73.8% in Q207.

Emirates Airline For the first six months of the current financial year ending September 30 2008, Dubai-based Emirates Airline (Emirates) reported net profits of AED284mn (US$77mn), down a considerable 88% y-o-y. This largely reflected the impact of record high fuel prices earlier in 2008. Despite this, operating revenues increased 31% y-o-y to AED22.1bn (US$6bn). Passenger numbers were up a reasonably strong 11% y-oy.

In November 2008, in a further expansion of its Indian operations, Emirates stated that it will add 31 weekly flights to its existing services in the period up until February 2009.

Etihad Airways In November 2008, Abu Dhabi-based Etihad Airways confirmed that it had agreed aircraft financing facilities worth more than US$210mn to pay for two new Airbus A340-600s. From December 2008, the airline launched new services to Moscow and Almaty from Abu Dhabi.

Air Arabia Continuing its recent strong performance, Sharjah-based Air Arabia reported a net profit of AED214mn in Q308, an increase of 30% y-o-y. Turnover was AED625mn, up 69% on the same quarter in 2007, while passenger numbers increased a buoyant 34% y-o-y to 978,794. In November 2008, Air Arabia signed a contract with Airbus for 10 additional A320 aircraft.