United Arab Emirates Tourism Report Q3 2009

Tourism Overview Tourist arrivals to Dubai in 2008 have been revised up sharply by the authorities this quarter, with new data showing that the number of visitors increased 8.3% year-on-year (y-o-y) to over 7.5mn (as against a 0.6% y-o-y increase in a previous press release). New figures also show that growth in arrivals to Abu Dhabi slowed in 2008 to a modest 3% y-o-y, with 1.5mn visitors. Based on these data, BMI now estimates that the annual growth rate of visitors to the UAE in 2008 was near 10%, at around 9.7mn arrivals (a slight increase in the rate of growth compared with 2007). More recent Dubai data for Q109, however, show arrivals were up a weaker 5% on the corresponding period in 2008 (a sharp slowdown compared with about 14% y-o-y growth in Q408).

Hospitality In line with the surprisingly strong growth in the number of guests in the hospitality sector in Dubai in 2008, guest nights were also up a favourable 9.2% y-o-y to 22.4mn nights last year. Corresponding to the sharp slowdown in the growth of visitors in Q109, however, Dubai hotels reportedly witnessed a drop of 16% y-o-y in occupancy rates during the first four months of 2009. In Abu Dhabi, meanwhile, following a slowdown in the growth rate of hotel guests in 2008, hotels in the capital city recorded a fall in occupancy rates of almost 7% y-o-y between January and April this year.

Forecast Scenario Taking into account a much weaker growth in tourist arrivals to Dubai in Q109 and a slowdown in growth of arrivals to Sharjah and Abu Dhabi last year, BMI continues to maintain that the UAE will face a challenging period ahead in the tourism sector. Our forecast of negative growth in tourist arrivals in 2009 remains -3% y-o-y. However, a slight recovery in growth in arrivals is anticipated in 2010. The poor outlook for the tourism sector in the short term is based on the impact of further downward revisions this quarter to BMI's forecasts for the US and key European economies - which together accounted for an estimated 40% of total arrivals to the UAE in 2007 - and growth in the Middle East.

Emirates Airline For the financial year ending March 31 2009, Dubai-based Emirates Airline (Emirates) posted group net profits of AED1.49bn (US$406mn), which was down 72% from the previous year's record profits of AED5.3bn (US$1.45bn). Group turnover was AED46.3bn (US$12.6bn), representing an increase of 10.4% on a year earlier. Despite continued business growth, the deterioration in the overall results reflects the impact of record high fuel prices in H108 and the impact of the global recession. Fuel costs accounted for 36.2% of the airline's operating costs in the last financial year - the largest ever proportion (up from 32.9% in the previous year). Following buoyant annual growth in passenger numbers of 21% a year earlier, Emirates carried 22.7mn passengers in the 2008-09 financial year; up a more modest 7% y-o-y.

Air Arabia In the latest results for Q109, Sharjah-based Air Arabia reported a turnover of AED463mn (US$126mn), up 21% y-o-y. Passenger numbers over the same period rose an annual 26% to 951,000.

Abu Dhabi National Hotels In financial results for the first quarter of this year, Abu Dhabi National Hotels (ADNH) recorded a net profit of AED150.7mn (US$41.0mn), representing a favourable increase of 10.4% on the corresponding period of 2008. The company also remains remarkably sanguine about the coming months, citing the strength of Abu Dhabi's economy, as well as a large number of imminent exhibitions and events scheduled in the emirate, including a Formula One grand prix in November 2009.