Recently, the UAE has received a lot of attention because of perceived economic instability. How has the economic downturn affected UAE?
MATTMÜLLER: The recent turmoil has actually benefitted the UAE. The events started in Tunisia, then it rolled over to Egypt, then it started in Syria and then Yemen. These countries are unfortunately affected and there are less tourists going there. Business travel has also decreased. As a result of that, travelers have moved to other, more stable, countriesand the UAE in particular. We could really see an influx of those people who would have eventually gone somewhere else. So it was a positive impact, unfortunately at the expense of the other countries.
What effect did the economic instability have on the UAE’s tourism industry? What are the current trends in the tourism industry?
MATTMÜLLER: When UAE’s economic crisis began, rates came down about 30 to 40% in some areas. The occupancy has been down, but we have seen a significant increase in inter-regional travel. People from Saudi Arabia and Kuwait are travelling here to the UAE. We also saw a good influx of people from Eastern Europe. Western European countries still continue to fuel growth, even in the Middle East. What is interesting is that the airlines, such as Emirates and other airlines in the GCC, they contribute positively to the tourism and the travel in the Middle East. I would say that in the old days, a lot of people went directly to Australia, or Asia, or China, and now we see more and more people stopping over here in Dubai. With all of the advertising Dubai has done, everybody knows the destination, they want to see it and it really helps to bring people into the destination. Looking into the future, we can see a continued increase in inter-regional travel. Over the Chinese New Year, a lot of people travelled from mainland China. By 2020, there will be over 100m outbound travelers from China. India has already achieved 12.5 m last year. So these two main markets will continue to grow and they will come to Dubai and to the GCC.
What is the GCC’s biggest growth market for tourism?
MATTMÜLLER: The biggest growth market in the GCC is definitely Saudi Arabia. It is a huge country; we have eight hotels in operation and we have a brand that is very well known and that will definitely benefit our other hotels here in the UAE and in other parts of the GCC. Kuwaitis are also traveling a lot. We come across people from Bahrain and from Doha. The other countries cannot be underestimated, but really, the greatest potential is Saudi Arabia. We continue to look for opportunities throughout properties in the area. Currently, we have two management agreements signed in Abu Dhabi, however, they haven’t materialized as yet as a result of the economic downturn. We are looking for opportunities to find alternative projects. We do not yet have a presence in Oman, which is a great country with a great culture, so we are currently looking for an opportunity in Muscat. We have a signed deal in Salalah which is toward the Yemeni border. We would like to have a hotel in Oman. We have five hotels in Jordan, except in Amman which is the Capital, so we continue to look for opportunities. And we were looking at Iraq. It is probably still a bit risky to go to Iraq at the moment, but we definitely still have Iraq and Iran on the radar screen, as we are moving forward.
How has demand for upscale accommodations in Dubai changed?
MATTMÜLLER: The supply and demand ratio in Dubai is well under control so far. We have seen a lot of hotels open, mainly in the 5 star and 4 star segments. When we look at the occupancies and the average rates, they have stabilized. Those hotels have been absorbed; actually the additional hotels have been absorbed quite nicely. And again, with the travel what I see in the next two years, I don’t see a major problem. There will be more hotels opening up but, with Emirates adding additional flights to new destinations, there will be more people coming in through the airlines. I see an increase in regional travel so I don’t see a major problem having additional rooms on the market. I also will say that with the recent correction of the average rate, prices are at a reasonable level. Dubai was perhaps a bit too highly priced pre-2008. This has now been corrected and it is an affordable destination again. This also helps to keep the balance for demand. So I am very positive, in particular with regards to Dubai and the prospect of Dubai looking into the future.
With the economic downturn, demand has increased for more affordable vacation accommodations. What is your company doing to address this issue?
MATTMÜLLER: The niches of 4 and 5 star hotels have great potential here in Dubai. Why? We have seen a middle class emerging in India. We have just signed an agreement with Bangladesh, another country with an emerging middle class. We talked earlier about China, so there is a great potential for 3 and 4 star hotels to develop here because there are a lot of 5 star hotels already and luxury hotels. If people started to travel from those countries I mentioned earlier, they would probably go first to 3 and 4 star hotels. Later on, as they grow, and they have higher disposable income, they go to the 5 star luxury segments. When we look at the situation in Europe, the economic situation, there are a lot of people who say, “Look, I want to go on holiday, but my budget is limited. So lets’ go to a 4 or 3 star hotel which is new, a good brand, rather than go to a 5 star hotel.” So there is a huge potential here in the UAE for 3 and 4 star hotels. I think it is being addressed by several different operators.
By 2020, there will be over 100m outbound travelers from China. India has already achieved 12.5 m last year. So these two main markets will continue to grow and they will come to Dubai and to the GCC.
How will Formula One impact the tourism industry in Abu Dhabi?
MATTMÜLLER: The recent events like the Formula One definitely have a positive impact on Abu Dhabi. More people now know where Abu Dhabi is, some didn’t know before, but many people are watching Formula One. It’s a fantastic racetrack so it creates a good awareness of Abu Dhabi. The week before the race, there is an influx of people. The hotels are usually full during the race and some people have to come to Dubai to find accommodation, but this is short lived. It’s not a sustainable business. With regards to the football tournament in Qatar; I could see the influx of construction companies and increased business travel to build all of those stadiums before 2022. But as we can see in destinations such as Beijing and Sydney, which hosted the Olympic Games, after the event the people are gone and it goes back to normal. Again, it will not create sustainable long term business in my view. It will help in the meantime, to bring business into the hotels, and during the actual events.