UAE's leisure travel outlook brightens on vaccine drive, Mashreq Bank says
The UAE's rapid Covid-19 vaccine campaign and the government's tourism-stimulating initiatives have brightened the outlook for leisure travel, according to Mashreq Bank.
A recovery in business travel will lag behind 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,” Zain Qureshi, managing director and global head of real estate finance and advisory at Mashreq Bank, said.
The report's findings are in line with global forecasts for the recovery of different travel segments. The return of leisure travellers is driving airlines’ traffic revival in the Europe, Middle East and Africa (EMEA) region, although a full recovery is still three years away and hinges on a return of business and long-haul passengers, according to a June 2 report by Fitch Ratings. Low-cost carriers are set to benefit the most while network airlines with larger exposure to long-haul travel will find it harder to recover traffic, it said.
In the UAE, it is critical for the tourism sector to take a phased and coordinated approach to rebuilding traveller trust as consumer sentiment remains wary, according to Mashreq Bank.
"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, businesses and malls can reduce the number of employees and/or hire them on a contractual basis, while hotels can shut down facilities like meeting rooms that are not in use currently, it said.
“It is about keeping your staff and operations as lean as possible until things stabilise,” Mr Qureshi said, advising businesses to be flexible in the way they allocate their costs to ensure greater financial security.
Hospitality and tourism businesses typically have fixed costs – rents, salaries, maintenance – with long-term contracts in place.
“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," the Mashreq Bank executive said.
Rebuilding consumer confidence will be key for the return of tourists and hotel guests. Hospitality and tourism businesses must 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,” Mr Qureshi said. “Marketing safe practices at the onset is important, but the business must truly show the customer that they are practicing what they preach.”
This could range from putting up divider shields in dining areas to sealing off rooms after they’ve been sanitised.
Mr Qureshi also recommended increased use of contact tracing mobile applications for both residents and tourists, citing examples from South Korea where a QR code-based entry log system has been enforced for “high risk businesses” such as sports facilities, nightclubs, buffet restaurants and large private educational facilities.
“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 (three to six months).
“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.”
