Dollar impact on tourism unclear

Dubai: While we in the country fret over the continuing decline of the US dollar and thereby the dirham, speculating endlessly over a revaluation or de-pegging, one industry may be rejoicing in the face of currency depreciation.

Travel and tourism might have gained from a sliding dollar, making the UAE a cheaper destination for visitors, especially those from Europe and Asia.

After all, the dollar, and therefore the dirham, have declined by more than 15 per cent against the euro since the beginning of 2006, creating what in principle should be a significant, business-generating lever.

However, industry insiders and analysts are not so sure of the impact, owing to the structural shifts in the UAE's favour in any case.

Given the inherent strength of the destination, the currency bargain is just one of many factors cited for ongoing growth in the sector.

According to the World Travel and Tourism Council, a UK-based consultancy, the UAE's offering grew by five per cent last year, posting Dh96.8 billion of economic activity.

In the first six months of this year, according to United Nations World Tourism Organisation (UNWTO) Barometer, Dubai registered a seven per cent increase.

Factors

The list of factors behind the continuing, robust growth of the UAE's travel and tourism sector is long enough.

It includes the Gulf governments' efforts to expand their product in terms of events and promotions, an open-skies policy, which has enabled the expansion of major airlines and the launch of low-cost alternatives, massive investments in airports, real estate and entertainment facilities, and last but not least, aggressive marketing around the world.

"Exchange rates therefore cannot be isolated as one separate cause," says Sandra Carvao, deputy chief, UNWTO. "But it is also true that with the sliding dollar, destinations that are pegged to this currency have a competitive advantage."

Arabian Adventures, according to senior vice president Frederic Bardin, has experienced a year-on-year surge of 18 per cent in its bookings, "for many reasons, not limited to the weakening dollar."

Yet it is true, he adds, that Dubai is one of the world's many destinations which prices itself in US dollars for overseas markets. All those destinations then become relatively cheaper simultaneously, and all should therefore have benefited.

One of the indicators of strong growth is the revenue per available room (RevPAR) of hotels, in which, according to the Deloitte and Touche Middle East consultancy, there have been continuous increases, driven by the underlying growth of the Dubai economy and the so-called 'value proposition' that it offers leisure and business visitors.

It continues to command the highest RevPAR in the region at $262 daily.

Rob O'Hanlan, partner, goes on to say, "We have seen nothing to suggest that the demand for Dubai hotel accommodation would have been any less had the exchange rate scenario been different."

The RevPAR increase in fact has much to do with supply constraints. In fact, in Dubai visitor growth has been hampered by lack of capacity.

Earlier this year Khalifa Ali Buamaim, Director of Overseas Promotions in the Department of Tourism and Commerce Marketing, told Gulf News, "We could have attracted more tourists in 2006 if we had not had a shortage of hotel rooms."

That problem is unresolved. "Given Dubai's current hotel occupancy, and the minimal increase in available room numbers this year, the city could not welcome significantly larger visitor numbers despite the weakening dollar," says Bardin.

Even though the dirham's weakness may not be much of a factor right now, the World Tourism Barometer adds: "Exchange rates should be watched carefully. The trends have not so far been violent, but have been going on long enough to bring about massive changes in relative purchasing power and in destination price rankings."

Still, the real trends are difficult to discern. "The results of these shifts are complex and often not easy to identify," it concludes.

It does make you wonder, however, whether dirham revaluation would make much of a difference.

Arrival: Tourists in Dubai fromJanuary to September

Arab countries 1.51 millionEurope 1.18 millionSouth Asia 763,327North America 291,426East Asia 286,508Africa 284,960

- DTCM