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Evolution of Tourism

In: Business and Management

Submitted By elijaggi
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Overview of Middle East Tourism Industry
Specifically in the Middle East 5, overall growth in number of tourists for 2012 is estimated to be -1%, which is up from a decline of 7% in 2011 due to the political turmoil and instability in the region (“International Tourism”). The Middle East as a whole earned $46BN from tourism receipts in 2011 (“UNWTO Tourism”). For the United Arab Emirates (UAE), tourism directly contributed to around 6.5% of GDP in 2011, with total contributions, including direct, indirect, and induced, accounting for 13.5% of GDP. From an employment standpoint, tourism directly supported 166,000 jobs (4.6% of total employment) and its total contribution to employment was 388,000 jobs (10.7%). The UAE invested almost $28BN in the travel and tourism industry in 2011 and ranked ninth worldwide in terms of total capital invested tourism. (WTTC)
UAE put tourism at the core of its economic development plans in order to diversify and strengthen its economy, while decreasing its dependency on fluctuating oil prices (Sharpley 2008). The plans have been successful; in 2007, non-oil revenues contributed to 63% of GDP, with Abu Dhabi and Dubai contributing 59% and 29%, respectively, to the UAE’s total GDP. What is more surprising is that due to Dubai’s push to use tourism to diversify its economy, Dubai contributes over 80% of the non-oil related GDP in the UAE. Dubai is now considered one of the top tourist destinations in the world. In 2011, Dubai’s top tourist source markets outside the UAE were Saudi Arabia, India, UK, Iran, and the US (“Guests”).
Economic Impact of Tourism in the UAE
The tourism industry generates substantial economic benefits to both host countries and tourists' home countries. Especially in developing countries such as the UAE, one of the primary motivations for a region to promote itself as a tourism destination is the expected economic improvement.
As with other impacts, this massive economic development brings along both positive and negative consequences.

Positive Economic Impacts in the UAE * Foreign Exchange Earning
Tourism is one of the most important sectors in Dubai, accounting for a large amount of foreign exchange received.
Tourism expenditures generate income to Dubai and with the high number of tourists flocking in every year, the FOREX trade in UAE is at its best. The tourist dollar $ is now a significant part of the economy.
Not only through tourists’ expenditures does UAE get its FOREX but also from the export incentives of the country.

Export market | Total value (in AED ) | Share to Total (%) | Annual average growth (%) | Iran | 94.3 | 15.2 | 21.3 | India | 68.3 | 11.0 | 71.2 | Saudi Arabia | 35.4 | 5.7 | 11.9 | Iraq | 34.8 | 5.7 | 43.0 | Switzerland | 23.0 | 3.7 | 65.1 | Pakistan | 21.4 | 3.5 | 29.4 | Belgium | 19.9 | 3.2 | 67.4 | Kuwait | 18.4 | 3.0 | 16.4 | Hong Kong | 15.8 | 2.5 | 18.2 | Netherlands | 15.2 | 2.4 | 102.4 | USA | 14.6 | 2.3 | 14.4 | Qatar | 11.4 | 1.8 | 33.6 | Egypt | 10.6 | 1.7 | 33.5 | Libya | 10.3 | 1.7 | 22.3 | UK | 9.6 | 1.5 | 18.7 | Bahrain | 8.7 | 1.4 | 9.1 | Oman | 5.6 | 0.9 | -6.8 | Sum (Major market) | 417.2 | 67.1 | 27.9 | SUM (Other markets) | 204.2 | 32.9 | 28.6 | TOTAL (World) | 621.4 | 100.0 | 28.0 | Source of data: Statistics Department, PCFC, Dubai |

Together, total exports to the above markets during the 5-year period amounted to AED 417 billion, for a total share of 67 percent and an average annual growth of 28 percent, actually slightly lower than the average annual growth of exports to the other markets, indicating Dubai’s equally strong exporting activities in its relatively smaller markets.
(Dubai Exporters Your Export Market) * Employment Generation
The rapid expansion of international tourism has led to significant employment creation in UAE and tourism generates jobs directly through hotels, restaurants, and taxi and souvenir sales and indirectly through the supply of goods and services needed by tourism-related businesses.
Jobs directly generated by travel and tourism include employment by hotels, travel agents, airlines and other passenger transport services, and restaurants and other leisure enterprises directly supported by tourists. By 2022, the report predicts, travel and tourism will account for 236,000 jobs directly, an increase of 3.2 per cent a year over the next ten years.

The UAE figures come against a global performance by the industry that shows it to be double the size of vehicle manufacturing and about one third larger than chemicals manufacturing, the report said.
"The sector's total contribution to world GDP was US$6.3 trillion in 2011, equal to over 9 per cent of global GDP and in terms of employment, the importance of the sector is even more pronounced," said the report. "After education, travel and tourism is the top job creator, with twice as many jobs as created by financial services, communications, or auto manufacturing."
Last year, 98m people were directly employed in travel and tourism.
"These figures prove beyond any doubt that it is time that the world's governments really sit up and take notice of the travel and tourism industry," said David Scow sill, the president and chief executive of WTTC. "As a driver of economic recovery and growth in a very turbulent time, the industry stands apart for the sheer scale of its ability to create jobs and growth."
(Black, 2012)
The aviation sector makes a substantial contribution to Dubai’s economy and today it supports 125,000 jobs in Dubai including direct, supply chain and induced jobs and a further 134,000 jobs in Dubai’s tourism industry.
(, 2011)
Economic Impact Report shows Dubai Expo 2020 would support over 277,000 jobs.40% of the employment opportunities generated would be in the travel and tourism sector, indicating significant potential for permanent roles to serve the expanded economy post-Expo.

The report estimates that 90% of the projected 277,149 employment opportunities would occur from 2018 to 2021 with the ramp up to Expo 2020 and the demand generated by the 25 million expected visitors. Out of the 90%, 147,000 jobs would be created in the travel and tourism sector, indicating the significant potential to convert a high percentage into permanent jobs to serve the expanded economy in the post-Expo period.

(2020, 2013) * Stimulation of infrastructure investment

Tourism in UAE induces the local government to make infrastructure improvements to improve the quality of life of tourists and residents as well as facilitate tourism. By the improvements of infrastructure in Dubai, it has helped to boom tourism over the years. Dubai has betted huge investment on that area: especially roads, airports and the construction of metro.
Any country cannot attract investors if the infrastructure is not developed to meet the needs of investors. Dubai has invested a lot of money on infrastructure and now boasts of having some of the best infrastructure in the world. Dubai’s road, air and sea network is well developed and this eases transportation in and around the city. Dubai boasts of an efficient metro rail, waterways, air transport and water transport which cater for its more than 5 million people population. Its buildings and architecture are of world class quality, with Dubai having the tallest building in the world. All these infrastructures are important for investment and they attract investors from different parts of the globe. Investment in turn increases Dubai’s economic growth and development, and in spite of possessing oil, oil accounts for only 6% of Dubai’s sources of foreign exchange, which shows the benefits reaped from investment in infrastructure (Carter & Dunson 56-63).

* Contribution to local economies and a varied economic base
In many countries, UAE included, the environment is a basic component of the tourism industry’s assets and tourism revenues are often used to measure the economic value of protected areas.
Money is earned through informal employment (e.g. street vendors, informal guides)
The positive side of informal employment is that the money is circulated and re-spent in the economy, referred to as a multiplier effect.
The expectations and needs of visitors can often lead to the creation of new businesses and commercial activities. This builds a more diverse economic base and reduces reliance on one or two traditional industries, which is often the case in rural communities.
In UAE’s case, the development and growth of the tourism industry has helped to reduce reliance on the oil industry.

Negative Economic Impacts of Tourism * Leakage
Which are of 2 types: Import & Export Leakage
The direct income for an area is the amount of tourist expenditure that remains locally after taxes, profits, and wages are paid outside the area and after imports are purchased; these subtracted amounts are called leakage. In most all-inclusive package tours, about 80% of travelers' expenditures go to the airlines, hotels and other international companies (who often have their headquarters in the travelers' home countries), and not to local businesses or workers. In addition, significant amounts of income actually retained at destination level can leave again through leakage.
Export leakages: - overseas investors
Of each US$ 100 spent on a vacation tour by a tourist from a developed country, only around US$ 5 actually stays in UAE’s economy. The figure below shows how the leakage happens.

In the United Arab Emirates, 8% of Travel & Tourism spending leaks out of the economy through imports. The manufacturing sector requires imports amounting to 58%.
(WWTC,, 2012) * Increase in Prices
Increasing demand for basic services and goods from tourists will often cause price hikes that negatively affect local residents whose income does not increase proportionately. With Dubai winning Expo2020, tourism development and the related rise in real estate demand will dramatically increase building costs and land values. Not only does this make it more difficult for local people, especially in developing countries, to meet their basic daily needs, it can also result in a dominance by outsiders in land markets and in-migration that erodes economic opportunities for the locals, eventually disempowering residents.
Expo 2020 is expected to add 2 per cent to Dubai’s Gross Domestic Product, as well as creates 277,000 jobs. That increased demand would ordinarily mean price and rent increases over the next seven years, said Craig Plumb, head of research at the company. (Croucher, 2013)

“Residential real estate prices rose on average 16 per cent year-on–year in April 2013,” the IMF said. “Supply growth was modest in 2012 but is expected to increase in 2013. Hotel occupancies and room prices have increased significantly because of a substantial rise in tourism,” it added and said that despite a large increase in the supply of office space, a recovery in rentals started in late 2012. (Emirates24/7, 2013) * Infrastructure Cost
Tourism development can cost the local government and local taxpayers a great deal of money. Developers may want the government to improve the airport, roads and other infrastructure, and possibly to provide tax breaks and other financial advantages, which are costly activities for the government. A recent WEF report (Travel and Tourism Competitiveness Report) has rated the UAE's infrastructure as among the best in the world. The country came second in quality of roads, third in quality of air transport, fifth in port infrastructure and eight in ground transport network. (, 2013)
Expo 2020 Win: Infrastructure Boost Expected
Dubai’s Expo win has paved the way for a slew of infrastructure developments in the emirate. Dubai’s prolific win to host Expo 2020 will fast-track infrastructure developments such as rail projects and ramp up logistics facilities that are worth billions of dollars. . According to a Standard Chartered report, Dubai is expected to spend around $9 billion to fund its growth plans for the event. “Capital expenditure will be directed to develop city-wide infrastructure that is not already in the pipeline and the Expo area and the immediate vicinity, such as the extension of the Dubai metro red line,” said the report. (Sophia, 2013)
With such great ambitious projects, infrastructure development is inevitable but this can result in reducing government investment in other critical areas such as education and health.
This essay concludes that UAE is highly dependent on the tourism industry. The strategic implementation made by the government for the development of tourism has remarkably impacted the hospitality industry and this impact has been observed as more positive than negative with reference to the literature review which examined that the industry of tourism is an important part of Dubai’s economic growth as result of increase flow of foreign cash into the country, as an employment generator and contribution to local economies, development of better infrastructure and a varied economic base. All of these shows the progress Dubai has made over the years. The changes caused by constant development in the tourism has given new opportunity to different fields of life, development of hotels and shopping malls despite the few drawbacks such as enclave tourism, infrastructure cost or leakages.

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