Dubai’s hospitality industry enjoys sunny outlook for 2023

13 February 2023 3 min. read

As Dubai’s hospitality industry continues its strong post-pandemic rebound, leisure and business trips are both on an upward growth trajectory heading into 2023. As a result, the UAE’s hospitality and hotels scene is anticipating a cracking year.

Early 2021 saw much of Europe head back into lockdown, as a new spike in potentially lethal Covid-19 cases spread across the country.

But 5,000 miles away some of the continent’s most-followed social media influencers – topmodels, movie stars, sporters and more – were enjoying a very different experience; flocking to Dubai – branded the ‘Covid Casablanca’ by some critics – at the behest of its tourist board.

Dubai statistics for year to date November 2022

Prior to the pandemic, the tourism sector had been a keystone of the UAE’s efforts to diversify its economy, and wean itself from the volatility of oil prices. At a time when most medical experts were still campaigning for people to stay at home until a vaccine was fully rolled out, the UAE’s most populous city was enjoying the return of international travel.

Heading into 2023, Dubai is continuing to reap the rewards of its early-travel approach, in tandem with its reputation as a luxury tourism destination. New figures from KPMG suggest that in 2022, most hotels were operating at almost full occupancy, signifying the sector’s quick return to pre-pandemic levels.

Sidharth Mehta, Head of Real Estate, KPMG Lower Gulf, commented, “The Dubai’s hospitality industry has witnessed remarkable growth in 2022 – driven by the government’s forward-thinking vision to address the needs of all hospitality stakeholders.”

Top source markets for visitors to Dubai – first 10 months of 2022

Record occupancy

In 2022, Dubai saw 15-year hotel occupancy highs, with India, at 1.4 million visitors, and Oman, at 1.1 million, leading the number of tourist stays. According to KPMG, this helped the city’s tourism sector contribute a total of $29.4 billion to the economy for the year.

At the same time, of 600+ consumers the firm surveyed across the UAE, 90% stated they had “confidence” in safety measures in place in hotels across Dubai, and 92% adding they were keen to stay in a Dubai hotel – a rise of 37% on 2021, pointing to rising demand the city is already moving to accommodate.

The UAE now hosts one of the richest hospitality markets in the world; with an expected 25% growth in the industry by 2030 and 40 million new visitors staying at hotels in Dubai by 2031.

Mehta: “The UAE is investing around $32 billion to acquire 48,000 more hotel rooms, to bring it to a total of 200,000. These developments place the UAE in an enviable position to navigate travel and hospitality demands in 2023 and beyond, equally driving economic growth by creating employment opportunities.”

Proportion of consumers who believe Dubai based hotels should further lower their prices

However, it is not all plain sailing for Dubai’s hotel recovery. While the ability of most consumers to travel to its sun-soaked venues is no longer barred by international law, the global recession is impacting the willingness of many would-be guests to pay its premium rates. Even as 50% of operators anticipate a 1%-5% increase in operating costs, the proportion of consumers who believe Dubai-based hotels should further lower their prices rose by a further 1% in the last year; to sit at an 86% majority.

While the addition of new hotel rooms may do something to saturate supply to meet demand, and potentially reduce the price of a stay in Dubai, the city may find that its leisure impact slows for when it comes to lower-income demographics.

Whether this translates as any meaningful dent in the industry’s income remains to be seen though, with many of Dubai’s venues famously specialising in catering to high-net-worth individuals – and that demographic is generally willing to pay large amounts for travel, irrespective of the economic outlook.