After several years of a relatively modest – yet visible – increase in demand, domestic tourism in the UAE has really picked up pace as a result of the covid-19 pandemic.  This growth is expected to accelerate in the coming years due to previously existing underlying market trends and market maturation.

Market growth is expected to create incremental demand for hotels and other types of tourism accommodation but there needs to be a change in investor’s approach to ensure that newly developed properties are properly designed and positioned to capture this market.

Govenment support linked to specific benefits

  1. Income security
    1. Reducing the reliance on inbound (international) visitors
    2. Reducing exposure to international events, crises and security issues
    3. Reducing exposure to currency risk
  2. Income creation and retention
    1. Increasing hospitality market size through induced demand
    2. Increased spending on hospitality from UAE residents within the country
    3. Increasing overall hospitality revenues in the UAE
  3. Stronger sense of belonging
    1. Fostering discovery of the country by residents and nationals
    2. Fostering a stronger sense of belonging to the country for residents


How domestic tourism creates hospitality demand


Daycations -
Use of a hotel room for the day
Limited creation of demand for hotels due to the short nature of the stay. Popular with resorts in the higher end of the market.

Staycations - Hotel overnight stay in the guest’s place of residence
Some demand created for hotels as staycations can last a few nights. Popular mostly with resorts in the higher end of the market.

Getaways - Short overnight stay within the country
Creates some level of demand for hotels and can be used to fill properties during low occupancy days for instance. Can potentially target all market segments.

Holidays - “Standard” holiday taken within the UAE
Creates the most demand for hotels due to the length of the stay. Can benefit to properties in all market segments.

Diversification of tourist activities


The UAE already offers a wide range of tourism attractions and at CBRE we believe that a wider variety of activities can be developed in order to appeal to a broader base of domestic tourists.

These activities can be expected to provide a more in-depth experience of the country and the varied attractions that can be enjoyed by domestic travellers. Activities can potentially be organised by the hotel operators themselves or by third parties for some of the more specific ones.

Some amendments in legislation, such as the recent changes announced by DTCM on overnight stays at desert camps will be beneficial to support more diversity in the offering.
alternatives

Hotel requirements for domestic travellers


The UAE currently has a hotel room supply of more than 170,000 hotel rooms across all seven emirates. However, only a small portion of these rooms accommodate domestic travellers. This highlights a gap in the market for domestic tourists, which the current offering does not really target.

New developments (or properties under refurbishment) that aim to capture this market should ensure that their product is adapted to attract domestic tourists.

  1. Large, connecting rooms

    A large percentage of travellers are families. Offering a high number of large or connecting rooms for instance with “Hollywood twin” beds is a key success factor.

  2. Agile price point

    Affordability through resident-only rates or rates redeemable against F&B vouchers for instance is key to capture domestic demand.

  3. Unique locations

    Hotel and resorts located outside of cities create a stronger sense of travel for residents. Beach-side, desert or mountain properties are some successful examples.

  4. Lots of privacy

    Emphasis should be put on separating customers with different profiles and providing different segments with specific facilities (kids pools, etc).

  5. Varied offering

Domestic tourists are expected to opt for properties that offer a unique and differentiated experience as shown on the next page.

Hotels outside of 5-star segment will be key for domestic demand

The resort offering in the UAE is currently focused on the 5-star segment with most properties in the upper-upscale and luxury categories. This implies a relatively high and hence selective price point. Reactivity from developers in adapting their projects to a different type of demand and in pursuing new opportunities, will be instrumental in supporting and capturing the expected growth in demand from domestic tourists.

Domestic tourism is a major driver of tourism globally. However, despite some demand already existing, the UAE is lacking the dynamism and level of demand of its international peers. There has been growth in the sector in the last few years and the market has a large potential in the UAE.

For more information read the full Domestic Tourism report here

Or contact Bruno Trenchard in the CBRE Hospitality and Leisure division.

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