Since mid-2014, hoteliers in Dubai have been going through tough times. The completion of substantial new hotel room stock came in baleful synchrony with the oil price crash, the Rubel depreciation and Dollar appreciation. All this weighed heavily on the tourism demand from Dubai`s most significant source markets, thereby substantially decimating the hotelier`s revenue figures.
As the saying goes, there`s no shadow without light and it has to be pointed out that Dubai`s hotel industry has been one of the best-performing worldwide for the greater part of the past decade. Occupancy and Revenue per available room (RevPAR) had been phenomenal, above all conditioned by tremendous growth rates in tourism with which the construction of hotel rooms could barely keep track. Furthermore, one should not forget that the increase in overnight visitors in Dubai amounted to a healthy 5% even in 2016, however marking a substantially slower than the long-term sector growth (8% CAGR since 2012).
Mass Markets as Growth Drivers
Still today, Dubai attracts by far the most free-spending tourists worldwide, with the spending per visitor clocking more than double the amount of runner-up London (Mastercard Global Destination Cities Index). However, the recent market evolution seems to support the assumption that the skimming strategy has reached its limitations and that even the wealthy are susceptible to price hikes (currency fluctuations) and declines in income (oil price).
It appears that Dubai`s tourism strategists would have seen this coming, as in my opinion it is not by coincidence that the advent of a host of theme parks – Legoland, Bollywood Parks Dubai – to name but a few, are to lure new tourist segments to the dynamic Emirate. And yet, the latter attraction gives a clear indication that the targeted audience are mid-income family travelers from the gigantic source markets India and China.