UAE's leisure travel outlook brightens on vaccine drive, Mashreq Bank says

Building consumer confidence is key to bringing back visitors and improving tourism, the Dubai lender says

Jumeirah Beach in Dubai. The UAE's rapid Covid-19 vaccination campaign has been a boon for local hotels The National

The UAE’s rapid Covid-19 vaccination campaign and initiatives to revive the tourism sector have brightened the outlook for leisure travel, according to Mashreq Bank.

A recovery in business travel is expected to lag behind that of leisure trips in the short to medium term, the lender said in a report titled The way forward for tourism and hospitality in the UAE.

“While hotel occupancy in the UAE will gradually recover on the back of increased domestic tourism and the return of international travellers, business travel will not return to pre-pandemic levels in the foreseeable future,” said Zain Qureshi, managing director and global head of property finance and advisory services at Mashreq Bank.

The findings are in line with forecasts for the recovery of different travel segments.

The return of leisure travellers is driving the revival of airline traffic in the Europe, Middle East and Africa region, although a full rebound is still three years away and hinges on the recovery of the business and long-haul travel segments, according to a June 2 report by Fitch Ratings.

Budget operators are set to benefit the most while network airlines with increased exposure to long-haul travel will find it harder to recover, it said.

Mashreq Bank urged the UAE's tourism sector to take a phased and co-ordinated approach to rebuild the trust of travellers as they remain wary.

“For hospitality and tourism businesses to successfully bring back their customers, achieving and maintaining operational agility will be critical in this evolving situation,” the report said.

In response to the unpredictable situation, food and beverage outlets can efficiently manage stock and avoid food waste by limiting purchases while businesses and malls can reduce the number of employees and/or hire them on a contractual basis. Hotels have been advised to shut down areas such as meeting rooms that are currently not in use.

“It is about keeping your staff and operations as lean as possible until things stabilise,” said Mr Qureshi.

He called on the industry to be flexible in the way it allocates costs to ensure greater financial security. Hospitality and tourism businesses have fixed costs – such as rent, salaries and maintenance – and long-term contracts.

“Budgeting in a way that gives them more flexibility and with shorter contracts of up to three months at the most will give them the chance to rebalance things,” said Mr Qureshi.

Rebuilding consumer confidence will be crucial for the return of tourists and hotel guests. This requires that companies apply and demonstrate stringent safety and hygiene measures at their premises, the report said.

“It is essentially about improving sentiment and making customers feel safe, not just in principle but visibly, too,” said Mr Qureshi.

“Marketing safe practices at the onset is important but the business must truly show the customer that they are practising what they preach.”

This could range from putting up divider shields in dining areas to sealing off rooms after they have been sanitised.

Mr Qureshi also recommended the increased use of contact-tracing mobile applications for both residents and tourists, citing the example of South Korea where a QR code-based entry log system has been enforced for “high-risk businesses” such as sports centres, night clubs, buffet restaurants and large private schools.

“It would significantly improve traveller sentiment while providing people with ‘red alerts’ on infectious hubs,” he said.

With Dubai announcing free vaccinations for all Expo 2020 participants and their staff when the exhibition starts in October, Mr Qureshi recommended extending that option to long-term visit visa holders on three to six-month permits.

“As one of the first mega-events to take place since the pandemic began, Expo 2020 could serve as a case study for the way forward,” he said.

“Covid-19 and its variant forms will perhaps stay on in the foreseeable future and the UAE really has a chance to set the benchmark with this global event.”