Local tourism and retail at some risk

Financial Fallout: Consumer spending is expected to remain buoyant across the Middle East should there be another economic slowdown across the world.

Consumer spending is expected to remain buoyant in the region.
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Consumer spending is expected to remain buoyant across the Middle East should there be another economic slowdown across the world.

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"At the moment we are not even thinking negatively," said Phil Evans, the director of retail leasing at Al Futtaim Group Real Estate. "What we have seen so far this year is very strong retail sales and general good feeling return to Dubai after a few years of economic instability."

A flood of tourists from the Gulf and China have kept hotel occupancy high across the region.

"We are not sitting here concerned as a retailer just because there has been seven days of shares going down in the western world," said Mr Evans.

More than 1 million tourists checked in to Abu Dhabi's hotels in the first six months of the year and occupancy has also increased in Dubai as unrest in some other parts of the Middle East and North Africa (Mena) put tourists off several destinations.

Occupancy in Dubai's hotels increased 0.7 per cent to reach 69.9 per cent during May despite an increased supply of hotel rooms, according to Deloitte.

Supermarket tills are also ringing loudly as the country's population grows and consumer spending power returns.

David Macadam, the head of retail for Mena at Jones Lang LaSalle, says the Middle East's vast oil wealth will boost consumer confidence.

"I think this region is generally immune from [a global slowdown]," he said. "When things started to get difficult in Saudi they gave people two month's salary, which soon trickled down to retail spending in Saudi and Dubai."

Despite this optimism, some consumer analysts believe a prolonged economic slowdown would affect the region eventually.

Gaurav Sinha, who runs Insignia, a travel branding agency in Dubai, says the US ratings downgrade and subsequent market turmoil could thwart recovery in the tourism industry. "I think the market is still reeling from the news," he said. "It rattled what little confidence there was for some kind of recovery."

Mr Sinha says the regional industryis still assessing the likely impact of last week's economic turmoil. However, he says a declining US dollar - to which five of the six GCC currencies are pegged - is likely to force down hotel room rates in the GCC.

"I think it's going to affect the average room rate significantly."