Tourism and Hospitality Industry in UAE
Tourism refers to activities relating to traveling for fun, recreational or business reasons which normally take place within a limited duration of time. Although tourism is usually associated with international travel, it may also refer to the travel from one location to another within the same country. The World Tourism Association has used the term tourists to define people who have a tendency of traveling and spending time in locations that are outside their usual dwelling places for a period of less than one successive year in order to fulfill their needs for fun, recreation and sometimes business reasons.
Conversely, hospitality is used to describe the type of relationship that may prevail between a visitor and a host, and it definitely goes hand in hand with the act of one party being hospitable to the other (Hall 2012, 11). Acts of hospitality can include the welcoming and entertaining of visitors and guests for the entire stay or period within which they are bound to spend at a particular tourist destination. The tourism and hospitality industry of different countries is thus responsible for integrating a wide range of activities within the tourism services sector and these may include lodging, hotels and restaurants, events planning,transport services, and cruise line among other services and activities that are often prepared to satisfy the demands and expectations of various types of tourists.The hospitality and tourism industry has increasingly gained significance both in the domestic and international domain and this is attributed to its wide range of positive and negative implications that constantly affect the balance of payment of different nations (Hasso 2011, 45). Today, the tourism and hospitality industry has become a major source of revenue for various countries, and it does not just affect the economy of specific countries but also that of the entire world. This paper seeks to examine the varied challenges and the opportunities related to the tourism and hospitality industry within the UAE as well as globally in order to make recommendations on how the identified challenges can be addressed to promote economic stability at a national and global scale. The paper will mainly focus on the challenges and opportunities and give an analysis ofhow the challenges and opportunities impact the tourism and hospitality industry in addition to making recommendations on how the industry can overcome these challenges and make positive contributions to national and global economy (Fillip 2009, 27).
For many countries, the tourism and hospitality industry is an important resource that plays a vital role in generating a huge amount of income. However, the significance of this industry was only recognized for the first time in 1980 during the Manila Declaration of World Tourism and it has continued to generate a huge amount of income towards both local and global economy because of the monies paid by tourists for products and services obtained. Kevin (2011, 90), states that the tourism and hospitality industry is very huge considering that it accounts for more than 30% of the overall global trade and services including 6% of major exports of goods and services.
The UAE tourism and hospitality industry has not been left behind and it has grown at a rapid rate with different countries within the region putting in more efforts to develop into a suitable destination for local and international leisure, recreational and business travelers. The increasing growth rate of the UAE’s industry can be attributed to the high recognition that the region has received especially for its unique entertainment, shopping malls, hotels and restaurants among other tourist attractions and the high influx of tourists can account for the rapid growth of UAE’s economy. Despite the global tourism industry experiencing a significant decline following the severe economic downturn that prevailed in 2008 and 2009, the UAE has indicated a significant improvement and even reported a healthy growth towards the end of the recession period. According to Fillip (2009, 32), the severe economic meltdown that took place in the first decade of 2000, had a huge negative impact on the tourism and hospitality industry across the globe, and this was followed by the H1N1 virus outbreak which also affected the industry severely. This resulted in limitation of international tourists who wanted to constrain their level of expenditure while others would be restricted by the authorities in their own and other countries in a bid to prevent the spread of the H1N1 virus. Nevertheless, the UAE was not affected by these issues and was actually reported to have significantly benefited from the latter development since most tourists termed it to be a safe tourist destination with an appealing and favorable shopping hub. Rapid subsequent improvement in global tourism was also high gainful for the UAE’s tourism and hospitality industry. According to Hall (2012, 24), significant recovery in the global economy was followed by a great improvement within the tourism and hospitality industry which caused international traveler arrivals to surpass any level of travel that had previously been recorded in the world’s history. This resulted in significant improvement in tourism and hospitality industry in UAE, as it recorded the highest level of returns in 2012 which were estimated at $102 billion (Hasso 2011, 56).
Tourism and hospitality industry contribute significantly to the global economy by generating more than 5% of the overall global income. The market structure within the global tourism and hospitality industry is in the form of perfect competition. This market is largely characterized by a wide range of products and destinations that are offered at different prices by both public and private service providers. According to Kevin (2011, 94), the global tourism and hospitality industry is increasingly transitioning into an information-based industry that mainly depends on modern technology to support its communication and information processes and subsequently enhance its level of competitiveness. It is for this reason that eTourism is becoming a common feature in the world tourism market structure and a significant component of the tourism market. Nevertheless, modern technology poses diverse challenges to global tourism enterprises that seek to embrace them. This is mainly attributed to the lack of agreed technical standards that can facilitate reduction of high implementation cost particularly to small businesses that may subsequently be unable to adopt modern technology instruments in their enterprises. The UAE is changing these dynamics by adopting a more distinct approach which not only relies on eTourism but promotes varying packages within an imperfect market structure hence allowing product buyers and sellers to negotiate in different situations so that they significantly influence product prices. Victoria (2012, 45), reveals that the UAE has adopted the concept of free zones in its tourism and hospitality industry. This has permitted foreign players in the industry to enjoy favorable government provisions on an equal footing as the domestic business owners. Consequently, they have been able to offer tourism services at reasonable prices which are easily negotiable among different categories of customers traveling under different circumstances. It has also facilitated the provision of diver products and services by a wide array of business operators that target travelers on shopping, health, sports, cultural and business tourism.
Challenges facing the tourism industry in UAE
Despite its importance and huge economic contributions, the tourism and hospitality industry is facing a significant level of challenges that affect its level of performance around the world in general and also within the UAE. According to Hall (2012, 41), the recent economic downturn that took place towards the end of 2000s led to significant reduction in the level of productivity in this industry because most international tourists restrained their level of movement to reduce their spending. This aspect affected the tourism and hospitality industry in UAE because of the huge fall in the number of international tourists that had previously frequented this region and had now significantly reduced their rate of traveling to limit their level of financial expenditure. The global economic crisis also perpetuated a number of economic risks that restricted the ability of the region to expand its tourism and hospitality industry. There are also a growing number of business operators that have continued to penetrate the tourism and hospitality industry and this has led tourism-related activities to continue generating a significantly growing level of returns and profits. Irrespective of their importance, the UAE has been exposed to severe competition with emerging tourism companies adopting highly competitive business strategies. As explained by Hasso (2011, 67), UAE is additionally facing constant geopolitical instability that include vague national and intercultural interactions, and these have the potential to impact its economic and social structure negatively and this may eventually affect the smooth progress of the tourism and hospitality industry. The region faces many problems in terms of non-addressed social and political imbalances that include high rates of unemployment, imbalanced income rates and a fractured government system. All these act as obstacles which limit the rate of expansion in domestic tourism as the region faces an increase in the number of low income populations which cannot afford to spend their limited resources on leisure and recreational activities. There has also been an increasing pressure on UAE’s natural environment that is now limiting the availability of non-polluted atmosphere, marine and water resources. This affects the stability and sustainability of both the flora and fauna, which in the long run will trickle down to the wider tourism and hospitality industry (Kevin 2011, 98).
Opportunities in UAE’s tourism and hospitality industry
The consistent recovery of the global economy since the 2000s recession has seen a significant improvement in the global tourism and hospitality sector with the number of international tourist arrivals increasing at the rate of 3.8% since 2010. China having become the leading spender on international tourism around the world, has spent much of its resources in emerging markets particularly within the UAE. This creates an immense opportunity for UAE’s tourism and hospitality industry as most emerging wealthy economies are looking up to and emulating China in their quest for unique recreational, leisure and business products and services. With domestic tourists comprising only 10.4% of the total guests arriving in this destination, UAE’s largest supply of guests come from wealthy regions of the world and these include America and Europe. According to Claviez (2013, 43), UAE has established a positive image which has led to its being ranked as the world’s top most tourist destination. This follows the capacity of UAE’s Tourism and Commerce Marketing Association to adopt quite aggressive marketing and promotional strategies which have proven appealing to an array of travelers from different parts of the world. This Association has concerted the efforts between public and private institutions to create a distinct destination which offers tourists the unique opportunity to experience the traditional Arabian products and services on one hand and the modern lifestyle on the other (Victoria 2012, 30). This has created an opportunity for the region’s tourism and hospitality industry to showcase the strengths of its vibrant tourism sector and attract an array of travelers seeking for unique experiences at affordable costs.
With the region being in competition with more than 139 countries around the globe that offer unique tourist experiences, UAE has been ranked as the 30th best tourist destination around the world and the first in the middle east region. It has also topped the ranking the world leader in destination marketing. UAE’s accommodation facilities including hotels, restaurants and lodges are growing in equal measure and this has created an opportunity for the industry to expand significantly, because there is room for more guests to be accommodated in such facilities. The level of government expenditure on the tourism and hospitality industry has also grown. In recognition of the crucial role that this industry plays in promoting the region’s economic progress, the UAE government authority has increased its level of spending on infrastructures such as roads, airlines, railways and electricity (Victoria 2012, 50). UAE has been ranked as having the fourth best airline transport system, and this creates an important opportunity for the destination to flourish with domestic and international tourists who can easily access this destination. The UAE also has a reliable Cruise port that has been mentioned in the World Travel Awards and this is located approximately 15 minutes drive away from the Dubai International Airport and provides a reliable transport system for passengers wishing to enter the region via the ocean. This creates a huge opportunity for the region to receive a huge number of tourists through different transport channels including water because more than 7000 passengers can secure transportation with the cruise ships.
The tourism and hospitality industry in UAE has a huge opportunity to expand and flourish because of many factors that present it with favorable conditions for further development to take place. By providing an array of unique products and services at a favorable cost, UAE has so far managed to attract wealthy investors from countries like China that are reputable for spending large amounts of money on the tourism and hospitality industry. This indicates that UAE can potentially attract a wealthy population that can spend huge amounts of money in touristic activities thereby contribute to a high level of returns that can perpetuate its significant economic growth. The region has also ranked as one of the world’s leading tourist destination that provides unique integrated experiences that merge both the traditional and modern lifestyles (Claviez 2013, 47). These presents a significant opportunity for the industry to flourish as it can appeal to a huge number of tourists from different parts of the world who are in search of the unique yet affordable products and services. The increasing level of government expenditure on infrastructural facilities is yet another great opportunity for the industry to expand, because it will ease access of various products and services that are offered in this region for tourists. It is however obvious that the various challenges facing the UAE tourism and hospitality industry are bound to hinder successful expansion of this industry, and this may significantly restrict its overall productivity and the subsequent contribution to the wider economy of the entire region(Victoria 2012, 53).
In order to ensure that positive progress that can contribute to significant growth of UAE’s economy is realized, there are specific strategic adjustments that must be made so as to address the various challenges that currently face the tourism and hospitality industry. There is sufficient evidence that UAE is facing severe competition from various business operators that have continued to invade the tourism and hospitality industry and in order to compete effectively and cope with this challenge, business operators serving in UAE’s tourism and hospitality industry need to adopt competitive business strategies that can meet that customers’ demands and expectations and ensure they retain a highly competitive edge. The industry therefore ought to adopt the modern technology to support communication and information services to ease the hospitality and also promote interaction that ought to prevail between hosts and the guests. Efforts should also be made to conserve natural resources through proper management of waste disposal to eliminate contamination of water resources and also protect flora and fauna. This would ensure the preservation of the natural habitats and hence maintain an appealing natural heritage. Government authorities should also adopt favorable regulations when creating employment opportunities for the local populations so that they increase their financial resources, and in the process promote domestic tourism and local consumption of touristic products.
The role of the tourism and hospitality industry in contributing to the progress of the global economy cannot be understated. Recent economic downturns have however affected the progress of this industry with majority of international travelers limiting their rate of traveling to reduce their level of expenditure. Although this adversely affected the UAE’s tourism and hospitality industry, significant adjustment that was characterized by the provision of affordable services has led to the recovery of UAE’s domestic and international tourism. Even though the global tourism and hospitality industry has assumed a perfect market structure with varying degrees of competitiveness where different business owners adopt different technological activities to increase their level of competitiveness, UAE has maintained a different market structure that focuses on the providing unique services at an affordable cost. The UAE’s tourism and hospitality industry has an imperfect market structure that does not allow any single business operator to monopolize and dictate market prices. This has made sure that unique services are available to an array of customers at an affordable cost. The industry also has favorable opportunities that include a positive image, improved infrastructures, and unique services that integrate traditional and modern lifestyle which can all contribute to higher productivity within the industry. It is however facing various challenges that include political instability, environmental issues, competition and economic imbalances that hinder further progress and expansion.
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