How the US dollar's slide will affect the cost of holidays and redirect travel flows

Executives across Middle East airlines, airports, hotels and cruise lines say business is not impacted by US tariffs so far but they remain vigilant

Russian tourists in the Egyptian Red Sea resort of Sharm El Sheikh. AFP

The weaker US dollar and higher US tariffs have put the Middle East's travel and tourism industry on high alert ahead of the busy summer season, as currency volatility and economic uncertainty sway consumers' holiday choices.

Continued weakness in the US dollar, to which most Gulf currencies are pegged, will make inbound travel to the UAE from countries such as Western Europe, Russia and India cheaper, analysts and industry executives said.

As the UAE dirham is pegged to the dollar, it will offer travellers better value than before, Paul Griffiths, chief executive of Dubai Airports, said.

"At the moment, anyone seeing to come to Dubai, earning a currency like the sterling or the euro is going to get better value for money because of the devaluation of the dollar," he said. "But I imagine it's going to swing back when the situation with America and tariffs becomes clearer."

The dollar index is down about 9 per cent since the inauguration of Mr Trump whose on-again, off-again plans to impose tariffs on US trading partners have rattled investors and hurt financial markets.

"The cheaper dollar will make Dubai and the wider UAE more affordable for many holidaymakers following several years of erosion of purchasing power for visitors from almost every country globally," Daniel Richards, senior economist at Emirates NBD, said.

The euro gained around 9 per cent against the dollar since the start of March when the greenback sell-off started, the sterling strengthened around 6 per cent, the Indian rupee was up 3.5 per cent and the Russian rouble strengthened past 81 to the US dollar.

"This should be a positive for the local tourism market, though, of course, it is not the only driver, with worsening consumer sentiment likely to also come into play in households’ decision-making around leisure travel," Mr Richards said.

Western Europe was Dubai’s biggest source market in the first quarter of 2025, followed by CIS and Eastern Europe and the GCC, government data showed.

Abu Dhabi-based Etihad Airways said a weaker dollar could create opportunities such as flying more passengers from India to the US through its hub.

"There's more opportunities for me to have Indian tourists go and get more money for their rupees in the US," Arik De, Etihad's chief revenue officer, said.

Etihad's route network is "balanced" so that weaker demand in one market is typically compensated by stronger demand in other areas, its chief executive Antonoaldo Neves said. Travel segments such as people visiting family and relatives "doesn't go away when you have a crisis".

Overall demand is strong and the network is "holding well", with load factors of about 91 per cent in April, he added.

Mohamed Al Zaabi, group chief executive of leisure and entertainment destinations developer Miral, said that a weaker dollar may be a "good indicator" for the business as it could help attract visitors from its main source markets in Germany, the UK, Russia, China and India.

The weaker dollar means that European travellers coming to the Gulf using euros will have a "better bargain," Selim El Zyr, co-founder and vice chairman of hotel operator Rotana Group, said.

Americans may plan overseas shopping holidays to avoid higher import costs on foreign goods, making mall havens like Dubai a favourable travel destination, Ross Veitch, chief executive and co-founder of online travel company Wego, said.

"Low-tariffed shopping destinations like Singapore and Dubai with tax-free shopping for visitors might benefit," he said. However, this will be offset by lower spending as Americans become more cautious about their discretionary income amid fears of a recession and shifting trade policies.

Reflecting on the Visit Sharjah pavilion at the Arabian Travel Market, at Dubai World Trade Centre. All photos: Chris Whiteoak / The National

Etihad Airways announced the launch of its Airbus A321LR aircraft at the Arabian Travel Market

Visitors at the Ras Al Khaimah stand at the travel and tourism event

The Welcome to Saudia Arabia stand

Artist Huda Al Rais works on a sculpture of Al Manama at the Ajman stand

The Visit Qatar stand at the Dubai show

Dolls of Emirates cabin crew on display at Arabian Travel market, which was first held in 1994

Ahmed from the Visit Bahrain pavilion opens oysters to find pearls, at the Arabian Travel Market. The show runs until May 1, 2025.

Outbound travel trends

On the other hand, the sliding dollar will make outbound travel for Gulf-based holidaymakers to European countries more expensive compared to the past few years, Mr Richards said.

The US may become more attractive for UAE visitors as they get more value for their dirham compared to Europe, he added.

However, the US, the world's third-most visited country, recorded a sharp decline in overseas visitor arrivals in the year-to-date. This is likely to worsen through the rest of 2025 amid an aggressive US stance towards historical trade partners and a "frostier" welcome at immigration, analysts say.

These factors combined are "really damaging the appeal of the US to visitors of all types", Mr Veitch said.

Outbound travel from Saudi Arabia to regional and international destinations remains "strong", with no major shifts due to the US dollar volatility, Muzzammil Ahussain, chief executive of Saudi travel company Almosafer, part of Seera Group, said.

"Certain segments of the Saudi population have an affinity to the US, having been to school there, and that will continue," he said.

Currency volatility is not a major factor in holiday decision-making for upper-middle class and high-income travellers, industry executives said.

At Saudi Arabia's Unesco World Heritage Site of AlUla, which is a key part of the kingdom's push to attract high-spending international visitors, US visitors account for 4 per cent of its total market.

For affluent travellers seeking "authentic" experiences and "meaningful" cultural immersion, travel remains a priority, Melanie de Souza, executive director of destination marketing at the Royal Commission for AlUla (RCU), said.

"These are people for whom travel is not a choice, it doesn't get compromised as a leisure spend. It is who they are. So it is prioritised. Therefore, I'm less worried about it in terms of the audiences I'm after," she said.

"Some of the people that we're after are the Teflon tourists, they're the people for whom travel is just not a negotiable."

US tariffs turmoil

At the Arabian Travel Market (ATM) gathering of industry executives in Dubai this week, discussions about the US tariffs and trade war loomed large.

The region's industry leaders said their business has not seen any significant impact so far from the US levies but they are closely monitoring demand for leisure and business trips, changes in travel flows and corporate spending.

Etihad Airways' boss said it is "too early to speculate" about the full impact of the levies amid increased global volatility and the airline remains unaffected.

"We are having a great April, we are in good shape," Mr Neves said.

This echoed similar sentiment by Emirates Airline that said it was too early to see any effect and that it expects record financial results and is optimistic that 2025 will be another good year.

Riyadh Air's chief executive Tony Douglas said the start-up airline would be ready to take Boeing aircraft that are destined for Chinese airlines if these carriers contractually refuse delivery of the planes due to the continuing US-China trade war.

"Like a whole bunch of airlines, we've made it quite clear that if additional aircraft become available, in simple terms, we'll take the lot," he told The National. "But until such time as any contract has changed, there's nothing we can fundamentally do."

The airline now expects its first commercial flight to start in the fourth quarter, slipping from an earlier start date of midyear, as it awaits delivery of its first aircraft from Boeing.

Mr Douglas said the US tariffs have not fundamentally changed the existing risks of jet delivery constraints. "Without deliveries, we can't go live. Without deliveries to the rate that we want, we can't grow at the pace that we want," he said. The uncertainty surrounding Mr Trump's policies means the situation can "change in a heartbeat", so the airline is focused on elements within its control, he added.

National carrier Saudia, which operates 20 weekly flights to the US, said its exposure is limited and has "steady traffic" of government officials, Saudi company executives and students, Arved von zur Muehlen, Saudia's chief commercial officer, said.

The downside will be if European carriers shift massive capacity from the US into Asia, which is a strong market for Saudia, but the airline is prepared to mitigate this risk, he said.

Angelo Capurro, executive director of cruise division at MSC Group, the world's third-largest cruise line, said that bookings, even from US customers, are unaffected.

"Customers continue to buy very openly. [They] continue to buy our cruises in the US because [they can] pay an amount of money that is even better now compared to the cost if you want to stay on land in some hotels," he said. "[Tariffs] will affect our cargo side more."