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United Arab Emirates Tourism Report Q1 2012

The tourism sector in the UAE looks set to record another good year in 2011, after a strong recovery in the previous year. In the period January-September 2011, Dubai hotels played host to 6.64mn guests (including UAE residents), an increase of 11% compared with the first three quarters of 2010. This is a slight moderation in growth though since Q111, when the number of guests rose a solid 14% year-on-year (y-o-y). In Abu Dhabi, during the first eight months of 2011 data show a good 13% y-o-y increase in tourists (including UAE arrivals) at hotels and hotel apartments (despite a fall in arrivals y-o-y in August), to over 1.3mn guests. Arrivals from Europe were up a marked 19% y-o-y, buoyed by a 24% increase in visitors from France, and growth of 18% and 17% in arrivals from the UK and Germany respectively.

There was also a surge in arrivals from the Gulf Cooperation Council (GCC), up by 25% y-o-y, and Asia (+23%). Of the GCC countries, substantial growth was recorded in visitors from Saudi Arabia (+56%) and Kuwait (+32%). In Sharjah, latest figures for the first nine months of 2011 show tourist arrivals (including UAE nationals) at hotels and hotel apartments reached over 1.1mn. Based on analysts estimate, this equates to a modest increase of just under 2% y-o-y.

Hospitality

In 2011, there was impressive growth in the hospitality sector. Between January and September there was a 26% y-o-y increase in the number of guest nights at Dubai hotels, to about 23.7mn. The average length of stay rose noticeably, by 14% y-o-y, while occupancy levels of hotels and hotel apartments also increased favourably, to 72% and 74% respectively. Hotel and hotel apartment revenue rose a solid 19% y-o-y, to nearly AED11bn. In January-August 2011, in Abu Dhabi, total guest nights increased 25% y-oy, to over 4mn nights. Occupancy levels were up by 9% y-o-y to 67%, while the average length of stay rose by 12% to around three nights. Growth in domestic tourism was more muted, with a 6% y-o-y increase in the number of guests. Hotel and hotel apartment revenue in the eight-month period was up 5% y-o-y to AED2.7bn, while average room rates dropped, improving competitiveness. In Sharjah, the total number of hotel and hotel apartment room nights sold during the first three quarters of 2011 was over 1.3mn nights, an increase of nearly 16% y-o-y (presumably due to longer staying guests). The overall occupancy rate of hotels and hotel apartments was 75% (compared with 73% in 2010 as a whole).

Forecast Scenario

We have edged down our 2011 forecast and now expect annual growth in foreign tourist arrivals to the UAE to be just under 10%. A somewhat sharper slowdown is anticipated in 2012 but growth should remain relatively favourable. The outlook is based on solid economic growth in the Middle East but a weak growth scenario for the eurozone (the two major source regions). We have revised down our eurozone growth forecasts, this quarter, to 1.6% from 1.7% for 2011; to -0.2% from 1.2% in 2012; and to 1.4% from 1.9% in 2013. Our economic growth forecasts for the UK - the top source market for inbound tourists to Dubai in 2009 and 2010 - have also been revised down, to 1.1% in both 2011 and 2012, and 1.7% in 2013.

Airlines

In September, Dubai-based Emirates unveiled major new expansion plans for the US, with the launch of daily services from Dubai to Seattle and Dallas. In November, Emirates placed the single largest aircraft order in dollar value in Boeings history for an additional 50 777-300ER aircraft, worth approximately US$18bn (AED66bn) at list prices. In an important strategic move, at the end of 2011, the flag carrier of Abu Dhabi, Etihad Airways, increased its stake in airberlin, Europes sixth largest airline, to 29.21%, becoming airberlins largest single shareholder. Both airlines now connect travellers to an extensive combined network of 239 destinations across 77 countries. In October, Sharjah-based Air Arabia started services to the Russian city of Yekaterinburg.

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