The Covid-19 pandemic declared by the World Health Organisation on 11 March 2020, and the subsequent travel bans implemented around the world, have hit the tourism industry severely. The UAE hotel sector relies to a large extent on international travel, and the compression of international demand has resulted in low occupancy rates since March 2020.

The pandemic has highlighted the need to stimulate UAE domestic tourism – a trend that is not completely new and that has been growing over the last few years, and UAE residents are showing a increasing interest in the exploration of the country and in the discovery of its tourism assets. The hospitality sector now has the opportunity to build upon this trend by offering relevant attractions and features to a targeted audience.

According to the WTTC, most of the top tourism destinations worldwide rely to a large extent on domestic tourism. Most European countries for instance depend on visitation by their own resident population. France, while having the highest number of international tourists in the world, only receives one third of its tourism income from these international visitors, highlighting the importance of the domestic market, representing the remaining two thirds of the tourism income.

The UAE presents the opposite trend, where tourism relies largely on international spend. Some factors explaining this trend are:

  • Smaller population: approx. 10 million in the UAE, compared to 67 million in France, or 328 million for the USA.
  • A slimmer middle class (which typically favours domestic travel) and a stronger high-income population which is more prone to international travel.
  • A limited variety of local offerings to stimulate demand.

Domestic vs int spend

After several years of a relatively modest increase in demand, domestic tourism in the UAE has really picked up pace as a result of the covid-19 pandemic. This growth is expected to accelerate in the coming years due to previously existing underlying market trends and market maturation. Currently Dubai attracts 44% of the demand from UAE nationals. Abu Dhabi benefits from its status as the country’s capital city to attract 32% of UAE nationals and the Northern Emirates represent a smaller share of demand relying mostly on the sun and sea offering.

UAE nationals represent less than one in five hotel guests

As a reflection of the country’s position -where East meets West - UAE hotel demand presents a relatively well-diversified base. At the country level, around half of demand is split between Europe (traditional markets that have fuelled the initial growth of tourism in the UAE) and Asia (with important upcoming source markets such as India and China which are becoming major drivers of tourism growth).

This focus on international demand by all of the 7 emirates (yet with different market dynamics) partly explains the limited weight of the UAE national’s demand for hotel accommodation.

Data collected by FCSA only represents nationality of guests and not place of residence. It can be assumed that part of the non-UAE demand consists in fact of UAE residents.

However, based on feedback from market players, we do not expect residents’ demand to represent a complete change to the data presented above.
Guests by nationality

Domestic demand picking up pace

Demand for hospitality accommodation emanating from UAE nationals has increased over the last few years according FCSA statistics. While UAE population increased on average by 1.3% per year between 2015 and 2019, the number of hotel room nights occupied by UAE nationals increased at nearly three times the pace (Compound Annual Growth Rate "CAGR" of 3.7%) over the same period.

This growth is significantly below that of international guests which increased by around 6% per year on average over the period, yet it shows a clear trend that UAE nationals are more and more prone to travel domestically.

UAE nationals show a preference for a few main destinations while travelling within the country:

  • Dubai attracts 44% of the demand; from UAE nationals; this is mostly due to the city’s strong and diversified attractions including family-friendly destinations, major retail offerings and a developed F&B scene.
  • Abu Dhabi benefits from its status as the country’s capital city to attract 32% of UAE nationals. Part of this comprises corporate and governmental demand; the Emirate also leverages on its entertainment, cultural and nature offering.
  • The Northern Emirates represent a smaller share of demand and rely mostly on their sun and sea offering. Although new attractions are being developed, for instance in Jebel Jais (RAK) and Mleiha(Sharjah) in the recent years.

 

After several years of a relatively modest – yet visible – increase in demand, domestic tourism in the UAE has really picked up pace as a result of the covid-19 pandemic. This growth is expected to accelerate in the coming years due to previously existing underlying market trends and market maturation.

Market growth is expected to create incremental demand for hotels and other types of tourism accommodation but there needs to be a change in investor’s approach to ensure that newly developed properties are properly designed and positioned to capture this market.


For more information read the full Domestic Tourism report here

Or contact Bruno Trenchard in the CBRE Hospitality and Leisure division.