Dubai Tourism Launches Ads as Hotels Show Softness Ahead of Expo 2020

Is it fair to judge the ebbs and flows of Dubai’s tourism when all is focused in the United Arab Emirates city on Expo 2020, the huge global gathering set to kick off next fall?

The event is expected to attract 25 million visits and participants from 190 countries between October 2020 and April 2021. The World Expo is expected to contribute approximately 1.5 percent of the UAE’s annual forecast gross domestic product during its run. It’s expected to add some $30 billion to the economy through 2030, according to an Ernst & Young study.

Preparations are, of course, running at a rapid pace, with construction of new venues and hotels spread across the city.

But right now all eyes are on the health of Dubai’s hospitality sector after six consecutive quarters that saw supply outgrowing demand, and more than 500 job cuts at state-owned luxury hotel chain Jumeirah Group.

As of June 2019, Dubai has more than 700 hotels that offer nearly 120,000 rooms. The city’s occupancy level  of 67.1 percent was the lowest for a second quarter since 2009, while the absolute daily rates and revenue per available room (RevPAR) were the lowest since 2003, analyst for consulting firm STR analysts have noted.

June was the strongest month of the second quarter with a 30.5 percent increase in demand, which helped monthly performance levels, reported STR. The lower occupancy levels in the second quarter could be reflective of the onset of summer and the quieter period during the holy month of Ramadan falling during this time.

Could it be that the oversupply is simply a function of new construction in preparation for the payoff from Expo 2020? Industry consensus within Dubai is that this is indeed the case and that the start of the expo will signal a shift in this balance as rooms begin to fill.

But Dubai’s tourism officials are not taking anything for granted with new advertising blitzes targeting its key markets for visitors.

For the Indian market, Dubai Tourism worked with Bollywood actor Shah Rukh Khan on a global #BeMyGuest campaign, which logged 160 million views in a few weeks.

In neighboring Saudi Arabia, Dubai Tourism entered into a long-term association with the travel services provider Seera Group, while in China (Dubai’s fourth largest feeder market), the tourism authority aggressively pursued direct-to-consumer platform-based awareness programs. Targeting travel between Arab gulf states, Dubai Tourism also piloted new platform collaborations with TikTok by inviting travelers from the region to share their Dubai stories with themed music for a chance to win a trip to the emirate. The program delivered more than 30 million video views and nearly 10,000 posted user-generated videos.

The largest source of visitors for Dubai in the first half of the year was India with 997,000 visitors, followed by the Kingdom of Saudi Arabia (755,000 visitors at 2 percent year-on-year growth over six months), rounded off by the UK, which delivered 586,000 travelers despite a significantly devalued British Pound.

Tourism growth

Dubai’s Department of Tourism and Commerce Marketing’s data reveals that the first half of the year showed positive numbers, with average occupancy for the hotel sector at 76 percent. During this time, establishments delivering a combined 15.71 million occupied room nights during the first six months of the year, which is only a 5 percent increase over the same period in 2018.

Despite the sluggish second quarter figures, tourism in Dubai has continued to grow, providing volume at a time of lower rates. In the first six months of 2019, Dubai welcomed 8.36 million international overnight visitors, which marked a 3 percent in tourism volume growth compared to the same period last year, according to Dubai Tourism.

“Global and micro markets will always experience economic cycles as destinations become increasingly competitive,” said Rupprecht Queitsch, CEO and senior partner of hospitality consulting firm INHOCO. “The key is how these developments are being dealt with. I believe the present shifts in performance by location, products, and brands are good for the guests, and Dubai is being sold as a destination with a great mix of options [for guests].”

The Wider Economy

The wider economy is forecast to grow as well. Private sector credit and investment in Dubai has been increasing, according to official data released by the government. Due to these developments, real gross domestic product growth rates in the short- to medium-term are projected to reach 2.1 percent, 3.8 percent, and 2.8 percent, in the years 2019, 2020 and 2021, respectively, according to data released by the Dubai Department of Economic Development.

Part of the economic momentum has been seen through the granting of business licenses – in the first half of 2019, the DED issued 14,737 new licenses, out of which 52 percent were commercial, 45 percent professional, 2 percent tourism-related and one percent industrial. DED’s data from April this year shows that a majority of businesses indicated they planned to place new purchase orders and expected volumes, revenues, as well as profits to increase.

Destination Marketing

Sifting through all the data, the long-term outlook for the city looks positive. The challenge is how the city will deal with it in the short-term to ensure healthy business. The tourism authority has embarked on a marketing blitz to ensure the hospitality and tourism sector continues to thrive in dynamic trading conditions.

His Excellency Helal Saeed Almarri, Director General, Dubai Tourism commented: “Remaining relevant and constantly top-of-mind to global audiences in today’s reality of overly saturated and omni-present communications is one of the main challenges we face across all sectors. Stakeholder engagement is crucial to generating tourism growth and we are confident that it is this collective vision that will carry Dubai’s tourism industry into the future and ensure that it remains a ‘must visit’ destination.”

All these initiatives are positive for growth but the extent to which it will affect hotel occupancy in the long-term is unclear. If the number of visitors projected for Expo 2020 materialize as planned, the city can expect improvements in occupancy in the next year. What that means for the city in the longer term will likely depend on supply, and whether Dubai can continue to successfully market itself as a desirable destination and capitalize on the publicity that the expo will hopefully generate.