Dubai’s tourism ambitions will squeeze hotels further

Outlook

Awarded the 2020 World Expo in 2013, Dubai set a target of 20 million annual visitors next year. Thereafter, it hopes to reach 25 million by 2025.

Tourism officials have advertised aggressively in new markets, seeing rapid growth in middle-income countries. To meet planned demand, authorities encouraged hotel construction. They project 164,000 available rooms next year, up over 40% on 2018.

However, growth in visitor numbers slowed to less than 1% in 2018. Data from Q1 2019 shows a 2% year-on-year increase. As supply outstrips demand, hotel revenues are falling. Even if Dubai attracts 20 million visitors next year, boosted by the Expo, it will struggle to sustain such numbers.

Impacts

• Hotel revenues will decline further, but steady increases in visitor numbers will benefit other sectors.
• The construction industry may see a slump post-2020 as hotel building slows.
• Falling rates and changing source markets, coupled with a drive to boost numbers, may result in a less wealthy visitor profile.