United Arab Emirates Tourism Report Q3 2008

Tourism Overview In line with revised data on foreign arrivals at Dubai hotels last year, BMI estimates that the growth rate in visitors to the UAE in 2007 was a relatively strong 7.5% year-on-year (y-o-y), equating to some 8.5mn arrivals. New data also show Europe accounted for the majority of tourist arrivals to Dubai in 2007 (32% of the total), followed by Asia (23%). Compared with 2006, the relative proportion of arrivals from various source regions was little changed, although the proportion of visitors from Asia and the Americas was up marginally.

Forecast Scenario We are forecasting real GDP growth of 7.7% in 2008 on the back of the ongoing investment boom. We are becoming more cautious however, given the risks posed by high inflation, as well as capacity constraints that are appearing in the economy.

BMI maintains its forecast of slower growth in foreign tourist arrivals to the UAE in the short term, largely due to a further slowdown in demand in the US and key European economies - which together accounted for 40% of total arrivals to the UAE in 2007. In particular, BMI forecasts growth in the eurozone economy slowing to 1.6% in 2008 but bouncing back towards its long-term growth potential level of 2.0% in 2009. As regards the US economy, we are now estimating a recession in H108, with a full-year real GDP growth forecast of 0.9%. Our estimate for a strong recovery in 2009 has been tempered slightly, with 2.0% real GDP expansion now our core scenario.

Hospitality Revisions to data show the hospitality industry in Dubai performed more than favourably in 2007, with 6.95mn guests staying in Dubai hotel establishments, an increase of 8% y-o-y. Guest nights were up a buoyant 16.7% y-o-y to 20.5mn nights. Dubai hotels also recorded an impressive average occupancy rate (beds) of 81.4% in 2007. At the end of 2007, Dubai had 319 operating hotels, up nearly 6% y-o-y, while the number of hotel rooms increased by a similar rate, bringing the total room capacity to around 32,600.

Emirates Airline In the financial year ending March 2008, Dubai-based Emirates Airline (Emirates) recorded an impressive increase in group net profit. The rise in net profit amounted to 54% y-o-y to AED5.3bn (US$1.45bn), after an increase of 23.5% y-o-y in 2006. Airline profits were a record AED5bn (US$1.36bn), up from AED3.1bn (US$844mn) a year earlier, an increase of over 62% y-o-y. The results are excellent considering continuing high oil prices.

Abu Dhabi National Hotels Abu Dhabi National Hotels (ADNH) reported net profit of AED477mn in preliminary financial results for 2007, representing a substantial increase of 63% compared with the previous year. Total revenue increased to AED1.3bn from AED1.2bn in 2006. The sharp increase in profits was attributed to excellent performances in all divisions and sectors. Results for Q108 show net profit edged up to AED136.4mn, compared with AED134.7mn in the corresponding period in 2007.