However, he added that a look at early daily data for February shows that further drops in demand due to the coronavirus outbreak are worsening these declines. “Occupancy was down to 66 percent on the first Saturday of February and then to 67 percent on February 8 (Saturday). Each number is low by market standards.”
China is one of the most significant source markets for the UAE. In 2019, Dubai alone welcomed 989,000 Chinese visitors in 2019, a growth of 15 percent over 2018. Additionally, as a global tourist and business hub, the city welcomed 16.73 million international guests last year, in comparison to 15.92 million in 2018.
“Chinese visitors currently account for 5 to 6 percent of total visitation to Dubai; however, this segment has been growing at a CAGR of 14 percent over the last two years and is, therefore, an important source market for Dubai,” said Martin Berlin, Middle East Partner & Global Deals Real Estate Leader, PwC. He noted that the current events in China could potentially impact visitation; “however, it is too early to quantify this risk”.
The Dubai hospitality industry faces the biggest risk in the Gulf region due to the travel restrictions triggered by the coronavirus outbreak, Reuters reported in February, quoting S&P analysts. The report also noted that prolonged travel restrictions could even hit visitor numbers for the six-month-long Expo 2020.
However, some industry experts said that it is difficult to predict the exact impact of the coronavirus in the short- or mid-term as the situation continues to evolve every day. Research agency Tourism Economics has modelled three scenarios of the expected impact on departures from China based on observations during the SARS crisis. It compared the scenarios with a pre-crisis forecast for departures from China to determine the potential losses by year and the time to full recovery.
The analysis revealed that China’s outbound trips to the UAE are “most likely” to drop by 7.8 percent if the outbreak is contained in a shorter time frame than SARS was. If the duration and average monthly impacts are broadly comparable to SARS in China back in 2003, Tourism Economics estimates that the country’s outbound trips to the UAE will drop by 18.6 percent. However, if the coronavirus lasts longer and is more severe than SARS, the UAE will see a drop of 27.8 percent in inbound trips.
Tourism Economics estimated a similar trend for the entire Middle East region, with a drop of 7.4 percent in the most likely scenario, 17.8 percent in a scenario comparable to SARS, and 26.6 percent in the worst-case scenario, a fall in outbound travel to the Middle East by 150,000, 350,000, and 530,000, respectively.
Overall, China’s outbound trips and expenditure are estimated to drop by 7 million trips and $22 billion in the most likely scenario; 17 million trips and $49 billion in the SARS scenario, and 25 million trips and $73 billion in the worst-case scenario.
AIRLINE INDUSTRY TAKES A HIT
The International Air Transport Association (IATA) said in statement recently that it foresees global revenue losses in 2020 ranging from $63 billion (where the outbreak is contained in current markets, with over 100 cases as of March 2) to $113 billion (where the virus has continued to spread) in passenger business.
The IATA’s previous analysis (issued on February 20, 2020) put revenue losses at $29.3 billion, assuming that the coronavirus would largely be confined to the markets associated with China. Since then, the statement said, the virus has spread to over 80 countries, and forward bookings have been severely impacted on routes beyond China.
Ali Manzoor, a partner at real estate consultancy Knight Frank Middle East, also said that many groups are cancelling bookings due to the coronavirus, particularly those from China, which is a key source market for the UAE.
He said that most hotel operators had responded by offering vouchers that need to be redeemed by the end of the year. Although in many cases operating income has been protected in the short run, Manzoor warns that many vouchers will be redeemed when the Expo ramps up, and, “as a result, the ability to yield during this period will be compromised at a time of peak demand.”
However, a Tourism Economics spokesperson said it is too early to tell how this crisis will affect an event like the Expo 2020. “There was concern about Zika ahead of the Rio Olympics, but it was handled, and that event was largely successful from that perspective,” said Matthew Dass, Senior Economist at Tourism Economics.
He noted that the Tokyo Olympics is probably more at risk, but “this will likely go ahead assuming an early resolution as in our most likely case, and recent messaging from the government suggest that it will go ahead”.
According to real estate consultancy JLL, the coronavirus has already affecting strongly several key cities in Asia-Pacific. “While it remains too early to conclude the duration of that impact, savvy and reasonable owners have always underwritten their investments on the long term hold period and not just the occurrence of the Expo event,” said Amr El Nady, Head of Hotels & Hospitality MEA and Executive Vice President, Global Hotel Desk, JLL.
(Writing by Syed Ameen Kader, editing by Seban Scaria firstname.lastname@example.org)
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