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Global Recession and Its Effect on Dubai Tourism

Introduction

Certain global issues always have direct and indirect impact on peoples and individuals even if the idea may seem remote and hardly connected. I will try to consider through my own perspective based on data gathered how the current global recession affects the tourism industry of Dubai.

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Prior to the most recent global fiscal crisis, everything looked warm and promising for many investors, business sector, workers, and consumers alike. Everything seems to be improving as an effect of the information and communication technologies: any body from the remotest region can sell to anybody from the busiest metropolitan. Internet has never been this good: access to all kinds and forms of information, entertainment, and a variety of un-conceived-before services and products.

For a while, there was a lull of the good time. During this time, Dubai has cashed in on the global trend of businesses expanding overseas as well as individuals and families affording to travel like regular jetsetters.

In 2003, Dr. Oman Bin Sulaiman of the Dubai Internet City (DIC) acknowledged a growth that was quite unprecedented. “We have grown even faster than we expected. We are today where we had projected to be in 2007,” (Horrovitz and Ohlsson, 2005, p 164). Already, he had been uncertain by that time, wary of maintaining the quality of service to its current clients as he envisions overseas expansion. Possibilities seemed endless.

This is expected for one city-state like Dubai which has grown exponentially after 1971 when together with Abu Dhabi and five other emirates formed the United Arab Emirates as a federation. It signalled their independence from the United Kingdom protectorate. Each emirate ruler forms the Supreme Council and in-charge of the education, defence, economy, foreign affairs, and ratification of federal laws. Dubai is currently headed by His Highness Sheikh Maktoum bin Rashid Al Maktoum. Its economy grew from oil and trade and change came after the 1990 Persian Gulf War when foreign trading firms from Kuwait moved their businesses to Dubai (Davidson, 2007). It soon expanded through free trade and tourism as construction boomed. The most recent tide of fiscal crisis, however, did not spare Dubai.

This paper shall proceed to present the implication of the fiscal crisis to Dubai’s tourism industry using the article “Dubai tourism takes hit in Q1 as hotel nights fall,” from e-Turbo News (Reuters, 2009).

Discussion

The News Article and Issue on Tourism in Dubai

The news article summed up that during the first quarter of 2009, the tourism industry slowed down as hotel guests fell to 16 percent with revenues 15 percent lower. Dubai has been a major tourist destination next only to Egypt among the Arab countries and it has hosted events that highlight shopping and tourism to increase visitors. The number is translated to still substantial 3.87 million or 3.14 billion Arab Emirates dirhams (AED) as reported by the Department of tourism and Commerce Marketing (Reuters, 2009).

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History

Tourism in Dubai is said to have started at the beginning of the twenty-first century while being established as a transport hub. Most of the gross domestic product (GDP) is derived from trade, tourism, real estate, construction and the financial services as about one-twenty-five percent of the Global 500 companies had their presence in Dubai. It was said that this is due to the favourable government regulation, its progressive stance on business and trade as well as safety of doing business and work.

It became the third most important re-export centre after Hong Kong and Singapore in 2004. Dubai does not impose corporate taxes, income tax, control foreign exchange, and without trade barriers and quotas. While import duties are only four percent, there are many exemptions as the free zones provided 100% foreign ownership and 100 percent repatriation of capital. Dubai became so popular a destination its population of expatriates soared to 75 percent by 2004 as it was declared one of the most prosperous states in the world (Horrovitz and Ohlsson, 2005).

Dubai has embraced the concept of global business excellence while transforming the UAE commercial landscape with the aim to become a knowledge-based economy by 2010 called the Dubai Vision 2010. Its motto was “If it’s good for business, it must be good for Dubai,” (Horrovitz and Ohlsson, 2005, p 166). Many of its tourism-related projects include the Dubailand which is a Disneyland-based theme park, the Palm which is a man-made resort island, luxury residential projects as well as the Dubai International Financial Centre.

Developments

While it was the major focus of the UAE to modernize health care, social services and education, standard of living also required improvement of the environment. Some portions of the country’s desert environment was transformed into green landscapes for agriculture, park landscaping as well as nature reserves. These are concentrated near urban centres (Ouis, 2002).

Other efforts of the government include image building. The government of Dubai exerted efforts not only in attracting investors by eliminating corruption in the business processing and establishment in Dubai. In addition, it also attracts the bulk of tourists by providing not only choice destinations but also cheap prized merchandise such as electronic gadgets and entertainment systems. Most of all, the image of Dubai as a safe destination for individuals was highlighted.

Aside from the above, Dubai also became a premier destination by providing the various industries land, infrastructure and utilities. These are either subsidized or for free as the beneficiary are subject to national and local legal regulatory environment (Horrovitz and Ohlsson, 2005). Free zones were also provided liberal regulatory environment from ownership of foreigners to exemption in tax and other duties.

Globalisation

Globalisation has never been more pronounced than it has been the recent years. It seemed various nationalities converge in cosmopolitan areas at home in every other locality as they are from their land of birth.

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Every other kind of nationality works in harmony with other ethnicities without so much care for skin colour, language, customs, way of dressing, and other differences that in previous decades were easily spotted about a foreigner in another land. Likewise, one hard-to-find item or even cuisine is easily found in any remote corner of the world. Previously, these may seem inconceivable. These are all effects of globalisation.

The unity of each nation into a single vision and mission is referred to as globalization. It is also the integration of national economy to international economy. This has been made apparent and enhanced with the information and communication technologies as well as advancement in the transportation industries. It is further driven by trade, foreign or direct investment, migration of peoples o various destinations, and cash flows (Bhagwati, 2004).

After the World War II, international policy-makers from different countries formulated policies that could enhance the prosperity of countries and decrease the chance of future wars. They removed boundaries that could remove conflicts between countries. Furthermore, they established the monetary fund to support the needs of the countries. Moreover they increased the quality of the international trade. International organisations largely credited for globalisation include the World Bank, the International Monetary Fund, as well as further promoted by the Bretton Woods conference as well as the General Agreement on Tariffs and Trade later on converted to World Trade Organisation which facilitated promotion of what they coined “free trade” characterised by:

  • Reduced or eliminated tariffs
  • Development of free trade zones
  • Reduced transport costs
  • Reduced control on capitals and funding
  • Harmonised subsidies for local enterprises
  • Subsidies for multinational corporations
  • Harmonized intellectual property laws
  • Recognition of intellectual property restrictions between countries (Osterhammel and Petersson, 2005).

But the theory of globalization is not very effective that it still remains an objective needing more positive action and results. Leaders and policy-makers are responsible on achieving the visions and mission of the globalization through foundations of activities, proposals, and bills. However, this could not be achieved without the support and cooperation of the people. In the case of Dubai, it has about 160 nationalities to please, with varying customs and traditions, as well as capabilities and expertise to offer.

The Global Crisis

At present, peoples all over the world are suffering from the global crisis. It affects most countries and even highly industrialized countries like USA and Japan. These countries feel the effects of the global crisis. Even other developed countries like Dubai as also affected by the global crisis. As many industries feel the blow of the fiscal crisis, businesses close down, bringing large portions of many countries’ populations into unemployment. This would have families and individuals focus on basic needs such as food, shelter, health and safety foregoing others such as travelling and other non-basic expenditures.

There are many factors associated to the collapse of the modern global economy. The titling of work distribution as well as production cost, global distribution of funds and manufacturing, speculation, and the collapse of the real estate industry of the west specifically the United States are all attributed to the current global crisis. It is not very certain, however, which was the root of it all. What is definite today is that many industries are adversely affected, with many closing down as others cut costs, diversify, adopt drastic measures such as reduction of staff or workers, closing shops or branches, as well as the inevitable closing down of the entire business altogether.

This situation definitely affected Dubai, specifically its business climate and the tourism industry. Dubai has earlier established its reputation as a global business hub where regional offices of MNCs may be established, where workers of considerable market value may provide quality output at lower cost of employers. This scenario was adversely affected because of the global crisis as regional offices need to cut costs or even close offices, operations and subsidiaries overseas.

Already, it was observed that hotel guests have already decreased in the first quarter of the fiscal year 2009 and has impacted on the industry. However, it was to be noted that Dubai remains the second choice after Egypt as Arab nation destination which makes Dubai remain competitive. Considering the fall of travel and major consumer expenditure for the last two to three years, Dubai almost remained resilient.

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Dubai Tourism

As the Dubai Tourism website claims, “It has spectacular beaches but is not Australia; it is one of the world’s most secure destinations but is not Singapore; it has opulent city hotels and superb beachside resorts but is neither Jakarta nor Bali. It has world class shopping but is not Hong Kong,” (quoted from Dubai Tourism, 2009, P 1). Major tourist destinations include the Ibn Battuta Mall, Jumeirah Mosque, Hot Air Balloon sightseeing, the Sheikh Saeed Al Maktoum House (Museum), the Shiek’s ancestral home Shindagha, as well as year-round events and activities that entertain and delight tourists.

One of the more interesting ones includes the Natural History Museum and Desert Park that features the flora and fauna of the Arabian Desert. It promotes relaxation and fun for all as it also aspires to become a centre for learning, original research, and enjoyment. There for viewing include an enclosed sandgazelle, as well as desert larks, bee-eaters, rollers, finchlarks, and hoopoes with an outside garden that have picnic tables, a cafeteria and a souvenir shop (Ouis, 2002).

Camping is also promoted to relive the Bedouin traditional life living in a tent for days and weeks. This has been closely linked with the “greening” of the environment as large areas of the desert have been cultivated using intensive irrigation. Dubai today is said to have about 33 mammal and reptile species indigenous to the Arabian Peninsula (DTCM, 2009). 20 million date palm trees are planted and 200,000 hectares cultivated. Major highways are planted with trees while parks are also groomed for wildlife preservation. The UAE, however, is dubbed to have the highest water consumption per capita in the world (Ouis, 2002).

The Emirates likewise reported that the tourism campaign of Dubai by June this year. Some 2,400 industry representatives reportedly visited the emirates in a two-month campaign called “Keep discovering Dubai” launched with the view to familiarize travel trade and media professionals with Dubai. It was a key project of the Department of Tourism Commerce Marketing (DTCM) and that aimed to “bolster and position Dubai as a first choice holiday and conference destination,” (quoted from Opodo, 2009, P 4).

A unique mix of nationalities from across the globe converged in the said campaign that is a joint effort of the DTCM in partnership with Emirates Airline and Group, Dubai hoteliers and Destination Management Companies (DMCs). It involved what is considered an exciting and eye-opening familiarisation trip for frontline travel staff from about 50 countries, tour operators, and travel media.

The campaign is said to have cost about AED 50 million for flights, accommodation, meals and tours. It also showcased Dubai’s accessibility, amenities, leisure and dining options. HH Sheikh Ahmed bin Saeed Al-Maktoum, Chairman and Chief Executive, Emirates airline and Group. “Since the inception of Emirates have emphasized that Dubai is a dynamic and constantly evolving destination as it offers “unparalleled entertainment and leisure options with new developments unveiled almost every month,” according to the sheik (as quoted from DTCM, 2009).

The project is noted to be an example of how key stakeholders work together to promote Dubai which also provided a rewards card to participants for their shopping expenditures. Dubai is claimed to have more than 160 nationalities and probably one of the most-multi-cultural destinations hosting some 400 world-class hotels and hotel apartments, some 41,000 rooms and more than 4000 restaurants and cafes that may cater to varying needs of different cultures of travellers (DTCM, 2009).

Conclusion

The issue of global recession and its impact on the tourism industry of Dubai is real and inevitable. It is also logical and understandable. There are worse destinations that had been severely affected by the down surge of tourism. What the industry should focus on is how it could retain a still competitive tourism industry as other countries already reel in most aspects of their economy.

I can see the issues, however, as pure challenge and therefore, a focus for the government in its current and future campaigns. These campaigns, however, should not be near-sighted but encompass a long image building process which has been successfully started. There are many ways to address this.

If all of the efforts of the government of Dubai shall be maintained as well as deliver what it has promised from the start such as maintaining liberal stance among foreigners both investors and workers, secure the safety and well-being of residents, workers and tourists, it is necessarily believed that Dubai will remain competitive in the tourism industry.

The slump in the tourism as already indicated is unavoidable due to the worsening global crisis that has adversely affected all countries in the world. It is inevitable that Dubai will be negatively affected as 85% of its current population is already considered migrants or non-natives. Still, with the dedication the government has shown and continue to achieve, it will take a long time before a very negative effect becomes apparent.

The tourism industry is closely linked with other industries, such as the business, transport, communication and information industries. The continuing trend where competition and developments introduced by the minute press on the high cost of travel as well as other services which could be offered and attained from other service providers. This will continue to put prices of air fare, hotel accommodation, food and entertainment industries lower than they previously are as new products are introduced. This may add attraction to previous non-travellers as well as reconsideration among those who have reduced their travels.

In a time of uncertainty, Dubai’s established capabilities, provisions and image will definitely help buoy up the decrease in the tourism rates as its business infrastructure and systems for global citizens at par with other highly developed western and Asian cities.

Recommendation

There are certain aspects of tourism in marketing, communication and promotions that may be developed in order to address the need to increase tourism. Activities and destinations are already propped up in Dubai. These are further provided properly through offering of fairly priced commodities that also attract travelers who may not consider going out of their country or locality for leisure purposes alone.

Perhaps, Dubai will do best by protecting and continue safeguarding the welfare of its natives, immigrants, expatriates, businessmen and workers already in the area. Through actual experience and word of mouth where testimonies of actual tourists become the truth for many other peoples and individuals who have not heard or considered visiting Dubai, there is a bigger chance that the tourism industry will become more competitive.

The global business environment, however, learn from models that work and Dubai have actually shown that it was able to adopt a model that did work, even miraculous considering the conflicts in nearby Arab lands recently. In fact, Dubai has already proven its capacity and has not actually achieved yet the ceiling of its aims and objectives to provide total satisfaction to its investors and workers. Dubai should sustain the feeling and truth that there is more to expect from it aside from what is already being experienced. As earlier mentioned, knowledge-based economy could be helpful as free trade zones and efficient government management were already established.

However, as Dubai promised to continue moving forward and retain its dynamism, other innovations are needed. A friendly and sincere culture may also add depth to knowledge. It should not only remain lip service. That is what has been asked and sought for by tourists: hospitable people and environment. Dubai may focus on this as its long-term and visionary goal, diversifying as well as innovating in all its efforts to deliver as promised.

Reference

Anwar, Syed Aziz and M. Sadiq Sohail. 2004. “Festival tourism in the United Arab Emirates: First-time versus repeat visitor perceptions.” Journal of Vacation Marketing, vol. 10: pp. 161 – 170.

Bhagwati, Jagdish. 2004. In Defence of Globalization. Oxford, New York: Oxford University Press.

Davidson, Christopher. 2007. The Emirates of Abu Dhabi and Dubai: Contrasting Roles in the International System. Asian Affairs, 1477-1500, Volume 38, Issue 1, Pages 33 – 48.

Department of Tourism Commerce Marketing (DTCM). “Keep discovering Dubai’ Global Campaign Launched.” 2009. Web.

Dubai Tourism. 2009. “About Dubai.” Web.

Govers, Robert, Frank M. Go, and Kuldeep Kumar. 2007. “Promoting Tourism Destination Image.” Journal of Travel Research; vol. 46: pp. 15 – 23

Horovitz, Jacques and Anne–Valérie Ohlsson. 2005. “Dubai Internet City: Serving Business.” Asian Journal of Management Cases; vol. 2: pp. 163 – 209.

Opodo. 2009. “Dubai tourism campaign ‘a success’.” Web.

Jurgen Osterhammel and Niels P.Petersson. 2005. Globalization: a short history. Princeton University Press.

Ouis, Pernilla. 2002. “‘Greening the Emirates’: the modern construction of nature in the united Arab Emirates.” Cultural Geographies, 9, 334.

Reuters. 2009. “Dubai tourism takes hit in Q1 as hotel nights fall.”, E-TurboNews. Web.

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