United Arab Emirates Tourism Report Q2 2009

Tourism Overview Based on new data this quarter on tourist arrivals to Dubai and Sharjah, BMI estimates growth of around 3% year-on-year (y-o-y) in visitors to the UAE last year to about 9mn arrivals (down from an estimated 9% y-o-y growth rate in 2007). This is largely underpinned by much weaker growth in tourist arrivals to Dubai, which slowed to only 0.6% y-o-y in 2008, with just under 7mn visitors (an increase of 45,000). In addition, the number of tourists staying at hotels in Sharjah totalled 1.53mn in 2008, up a reasonable 5.5% compared with the previous year. Partial data also suggest a significant downturn in growth in arrivals to both emirates in the latter part of 2008.

Hospitality Despite very weak growth in the number of guests staying at hotel establishments in Dubai, hotels registered 15% y-o-y growth in revenues to AED15.3bn last year. The authorities also revealed a 16% increase in the number of hotel rooms and hotel apartments compared with 2007. Recognising a downturn in the tourism sector, the Dubai authorities have launched a number of initiatives, since the start of 2009, to help boost hotel occupancy rates and promote the destination. These include, offering visitors up to 40% discounts on hotel room rates. In Sharjah, the number of room nights spent by visitors in hotels and hotel apartments rose only 0.4% y-o-y in 2008 to about 1.5mn. The authorities in Sharjah are also currently undertaking special promotional initiatives to reignite tourism to the emirate.

Forecast Scenario Taking into account the recent downward trend in growth in tourist arrivals to Dubai and Sharjah, this would suggest a particularly challenging period ahead for tourism in the UAE. Indeed, we now forecast negative growth in tourist arrivals in 2009 of -3% y-o-y (which may be on the optimistic side). A slight recovery in growth in arrivals is anticipated in 2010, however. 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, and the UAE and the Middle East as a whole.

Etihad Airways Following a massive 67% y-o-y increase in passenger numbers in 2007, Abu Dhabi-based Etihad Airways recorded a further considerable increase of 34% y-o-y in traffic to just over 6mn passengers in 2008. This year, the carrier will launch new services to Melbourne, Istanbul, Athens, Larnaca and Chicago.

Air Arabia In the financial year ending December 2008, Sharjah-based Air Arabia reported robust results, with net profit up almost 36% y-o-y to AED510mn (US$139mn). Turnover reached nearly AED2.1bn (US$563mn), up a buoyant 61% on 2007, with a marked 33% y-o-y increase in total passenger numbers to 3.6mn. The carrier has established a joint venture company, Air Arabia Maroc, based at Casablanca Airport. Air Arabia's second hub will provide flights to a range of international destinations across Europe and Africa. It expects to start operations, with two new Airbus A320 aircraft, by April 2009.

Abu Dhabi National Hotels According to preliminary results for 2008 (ending in December), Abu Dhabi National Hotels (ADNH) reported a sizeable increase in net operating profit of 27.3% y-o-y to AED456mn, while total operating revenue increased almost 30% y-o-y to AED1.74bn. The company attributed the strong performance partly to excellent results in the hotel division. Net profit, however, fell some 38% compared with a year earlier, to AED293mn. ADNH will add two new properties to its portfolio of hotels this year and has three other hotels currently under construction.