Abu Dhabi forecasts it will receive 600,000 Chinese tourists a year by 2021. Razan Alzayani / The National
Abu Dhabi forecasts it will receive 600,000 Chinese tourists a year by 2021. Razan Alzayani / The National

Travel and Tourism

Abu Dhabi seeks large rise in Chinese tourists

The emirate is aiming for a 265 per cent increase in hotel stays by Chinese tourists compared to this year.

Andrew Scott
Andrew Scott
Dubai

November 07, 2016

Abu Dhabi will receive 600,000 Chinese tourists a year by 2021, a 265 per cent increase on the 163,935 guests who stayed in the emirate’s hotels during the first nine months of this year, according to the emirate’s tourism organisation.

“We seek to keep pace with the increasing demand for overseas vacations in the Chinese market by providing highly tailored programmes that cater to the needs of Chinese travellers,” said Saif Ghobash, the director general of the Abu Dhabi Tourism & Culture Authority (TCA Abu Dhabi). “We recently visited China with our partners … with the aim of bolstering the sales of holiday and tourism programmes to Abu Dhabi.”

Last year, China had 120 million outbound tourists, a 12 per cent jump on 2014, who spent US$104.5 billion, which was 16.7 per cent more than in 2014, according to figures from China Tourism Research Institute. Growth slowed in the first half of this year with just over 59 million outbound tourists.

“While the growth projections look slightly aggressive, we do not consider this impossible,” said Rashid Aboobacker, an associate director at Tri Consulting. “The Chinese outbound market is estimated to be 120 million in size [in 2015] and expected to grow to over 177 million by 2020.”

The UAE receives only a very small proportion of this market. Of the 14.2 million visitors to Dubai in 2015, 450,000 were from China.

“Based on our research and experience, a large proportion of Chinese tourists tends to gravitate towards budget/midmarket accommodation. There is relatively limited supply of three- and four-star hotels in Abu Dhabi, but hotels in the city are much cheaper compared to Dubai at the moment,” said Mr Aboobacker.

TCA Abu Dhabi has an office in China to work with the country’s tourism and travel sectors, ensuring that the emirate is included in programmes offered to clients. Hotels in the emirate have also received the China Tourism Academy’s Welcome Chinese Certification, given to destinations offering dedicated services such as Mandarin-speaking staff.

In September, the UAE Government said it would grant Chinese visitors visas on arrival.

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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

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