United Arab Emirates Tourism Report Q2 2008

Tourism Overview In line with new data on foreign visitor arrivals at Dubai hotels last year, BMI estimates that the growth rate in visitors to the UAE in 2007 was a relatively strong 7.4% year-on-year (y-o-y), at some 8.5mn arrivals, which was slightly higher than our previous forecast. This represents another good year for tourism, after estimated y-o-y growth in visitor arrivals to the UAE in 2005 and 2006 of 8% and 6% respectively.

Forecast Scenario Real annual GDP growth will moderate during our forecast period, although we continue to highlight good prospects across the financial, construction and tourism sectors and anticipate strong growth in public sector spending. We forecast a slight drop in real GDP growth in 2008 to 6.2%, on the back of slower growth in the non-oil sector. We estimate that real growth came in at 7.5% in 2007, just below an IMF forecast of 8%. Looking further ahead, we foresee a cyclical slowdown between now and 2012, reinforced by a moderation in global oil prices from 2009 onwards. Nevertheless, our forecast average annual growth rate of 4.8% over the next five years means that our broadly positive outlook for the UAE remains firmly in play.

BMI maintains its forecast of slower growth in foreign tourist arrivals to the UAE in the short term, although annual average growth should remain favourable at over 4% y-o-y during the period to 2012.

The less robust outlook for tourism over the next few years is largely underpinned by the global economic outlook, which has deteriorated significantly, with a further slowdown in demand anticipated in the US and key European economies - which together accounted for some 40% of total arrivals to the UAE in 2006.

Hospitality The hospitality industry in Dubai looks set to have achieved strong results in 2007. Recently released data show 5.86mn guests stayed at Dubai hotels (excluding hotel apartments) last year, an increase of over 7% y-o-y. Guest nights were up some 13% y-o-y to around 15.9mn nights. Furthermore, Dubai hotels recorded an impressive annual average occupancy (beds) of near 82% in 2007.

Etihad Airways Abu Dhabi-based Etihad Airways carried 4.6mn passengers in 2007, a very strong 67% increase y-o-y.

The airline believes that strong demand in the Middle East will help it withstand any drop in global travel on the back of an economic slowdown, with the airline forecasting a robust 30% y-o-y increase in passenger numbers in 2008.

Air Arabia Sharjah-based Air Arabia recorded considerable growth in net profit of some 270% y-o-y to AED376mn (US$102.4mn) in the financial year ending December 2007. This was based on a turnover of AED1283.4mn (US$349.7mn), up a buoyant 71% y-o-y. The carrier also reported a marked increase of about 53% y-o-y in total passenger numbers to 2.7mn.