The hospitality sector in the United Arab Emirates is undergoing a range of structural changes, Knight Frank collaborated with Oxford Economics to analyse how the UAE’s Hospitality and Tourism market’s fundamentals will change over the next decade.

HEADLINES

The hospitality sector’s direct contribution to GDP has increased by 138% in the 10 years to 2017, with employment in the sector growing by 119% over the same period. By 2026, forecasts from Oxford Economics indicate that the direct contribution will increase by an additional 72% and as a result, related employment will grow by 16% to over 659,000.

The total number of overnight stays has increased by 155% in the 10 years to 2017 to 70.9 million. We expect the level of growth in tourism to remain strong over the next decade, with total overnight stays expected to increase by 59% to over 113 million by 2026.

The composition of the top 10 source markets to the UAE has not changed dramatically over the last decade. Nonetheless, we are beginning to see a shift in key source markets that has begun to have a material impact on market dynamics.

Taimur Khan, Head of UAE Research, commented: “As the source markets continue to evolve the hospitality market will have to adapt to cater for a range of demand at different price points. Currently the supply of hotel stock by the number of keys is very much skewed towards high-end properties. As a benchmark, in Abu Dhabi and Dubai currently four and five star hotels account for 66% and 57% of total available rooms respectively.

The source markets from which incremental room night demand will be generated are anticipated to be comparatively price sensitive and therefore will seek more affordable accommodation.

Six of the top 10 forecast source markets have relatively low income per capita, and even with a growing middle class this is unlikely to translate to demand for upscale or luxury hotels.”