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Hospitality Recovery: The significance of UAE’s Domestic Tourism

DomesticTourism
Reactivity from developers in adapting their projects to a different type of demand will be instrumental in capturing the expected growth in demand from domestic tourists

UAE, November 2020: The global pandemic has highlighted the need to stimulate UAE’s domestic tourism – a trend that is not completely new, has been growing over the last few years, and UAE residents are showing an increasing interest in the exploration of the country and in the discovery of its tourism assets.

According to the WTTC, most of the top tourism destinations worldwide rely to a large extent on domestic tourism. The UAE presents the opposite trend, where tourism relies largely on international spending, with half of demand split between Europe and Asia.          

Bruno Trenchard, Senior Manager in the CBRE Hospitality & Leisure division, commented, “After several years of a relatively modest increase in demand, domestic tourism in the UAE has really picked up pace as a result of the covid-19 pandemic. This growth is expected to accelerate in the coming years due to previously existing underlying market trends and market maturation. Currently, Dubai attracts 44% of the demand from UAE nationals. Abu Dhabi benefits from its status as the country’s capital city to attract 32% of UAE nationals and the Northern Emirates represent a smaller share of demand relying mostly on the sun and sea offering.”

 

domestictourism1           domestictourism2

 

Market growth is expected to create incremental demand for hotels and other types of tourism accommodation, but there needs to be a change in the investor’s approach to ensure that newly developed properties are properly designed and positioned to capture this market. Specific benefits are:

  1. Income security
  • Reducing the reliance on inbound (international) visitors
  • Reducing exposure to international events, crises and security issues
  • Reducing exposure to currency risk
  1. Income creation and retention
  • Increasing hospitality market size through induced demand
  • Increased spending on hospitality from UAE residents within the country
  • Increasing overall hospitality revenues in the UAE
  1. Stronger sense of belonging
  • Fostering discovery of the country by residents and nationals
  • Fostering a stronger sense of belonging to the country for residents

The UAE already offers a wide range of tourism attractions and the CBRE report, “UAE Domestic Tourism” states that a wider variety of activities can be developed in order to appeal to a broader base of domestic tourists.

DIFFERENT WAYS DOMESTIC TOURISM CREATES HOSPITALITY DEMAND

  • Daycations - use of a hotel room for the day
  • Staycations - hotel overnight stay in the guest’s place of residence
  • Getaways - short overnight stay within the country
  • Holidays - “standard” holiday taken within the UAE

The resort offering in the UAE is currently focused on the 5-star segment with most properties in the upper-upscale and luxury categories. This implies a relatively high and hence selective price point. Reactivity from developers in adapting their projects to a different type of demand and in pursuing new opportunities will be instrumental in supporting and capturing the expected growth in demand from domestic tourists.

Domestic tourism is a major driver of tourism globally. However, despite demand already existing, the UAE is lacking the dynamism and level of demand of its international peers. There has been growth in the sector in the last few years and the market has potential.

However, support is also required from the government to help develop new tourist attractions. Investors will need to slightly change their approach to development projects to ensure that their hotels have the necessary characteristics to attract domestic demand and that they are positioned in one of the numerous segments (glamping, midscale resorts, etc.)  where opportunities can be identified.

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