UAE tourism must battle 'perfect storm'

Speaking at the Meed Dubai Mega Projects conference, Alex Kyriakidis, Global Managing Partner for tourism, hospitality, and leisure for Deloitte, said this 'storm' includes the downward spiral of equity markets and the upsurge in the dollar that is impacting the pricing of many destinations around the world.

'For dollar-pegged economies, such as the one we are in, that means significant pain,' he said.

The price of a trip from the UK to the UAE has now gone up by almost 40% simply because of the exchange rate, which is a huge blow to hotels in Dubai and Abu Dhabi as the UK is one of its biggest feeder markets.

The enormous drop in house prices in the UK is also taking a huge dent out of consumers' wallets and making them think twice about their travel plans.

'They are not going to feel good about blowing away thousands of pounds to travel the world and visit anywhere, including Dubai,' he says.

Other factors that are contributing to the downward economic spiral are the deflationary environment and the credit crunch. Kyriakidis predicts that among all of the tourism projects planned in the world, one third - the ones that are currently underway - will continue and be completed. Of the rest, about a third will be postponed and about a third will be cancelled altogether.

All of these factors are causing consumer confidence to plummet, and when this happens so too does tourism spending, as the two go hand in hand. Combined with the fact that Dubai has some of the most expensive hotels in the world, it is easy to see why the emirate's tourism sector has taken a hit.

To illustrate, hotels in Dubai recorded a 38% decline in revenue per available room (RevPAR) in February compared to the same month one year ago, he noted.

Keeping market share

In this dismal market, the key is not to focus on profits, but on keeping your market share relative to your competitors. Kyriakidis says that in order for the UAE to keep its share of tourists it needs to take the following steps:

'Keep focusing on tourism: The UAE has hung its hat on tourism. Pull back on that and it will cost the country its existing base of 6.5 million to 7 million visitors that it has fought very hard to achieve.

Market the UAE as one destination: The time has come to market the UAE as a whole, rather than just Dubai or Abu Dhabi. The reason is that travellers are looking for more experienced-based tourism, and the UAE can offer this type of product by packaging trips to multiple emirates as they offer very different types of experiences.

Get boosts from airlines: Emirates Airlines and Etihad are going to need to play bigger roles in boosting tourism in the UAE. Prior to the current economic crisis, these airlines were more interested in taking customers to foreign cities than bringing them to the UAE. The time has come for these carriers to now think about Dubai, Abu Dhabi, and the UAE as being their number one focus in terms of marketing and pricing.

Build more attractions: The UAE needs theme parks and other types of attractions to diversify its experience for families and encourage them to visit here on a year-round basis. What is there for a family to do other than staying at the beach and visiting Atlantis and skiing for an hour in Mall of the Emirates? The key is to give them a broader experience to lure them to stay for four and a half days on average, instead of the current three and a half days. That one day would make a huge difference in terms of tourism revenue.

Control hotel supply: The UAE currently offers about 35,000 rooms, with 25,000 more due come on stream in the next three years, but that is where it should stop. In this market, having more than 60,000 rooms we will undermine the industry. In some ways the economic crisis is taking care of ensuring that no further rooms are added in the short term.

Develop more mid-market hotels: The UAE has some of the most expensive hotels in the world. Developing more hotels in the budget and mid-market range will help attract a broader market of visitors, which is especially important in this current economic climate.'