Russia’s falling fortunes take a toll on Dubai visitor numbers
The fall in the value of the rouble, the effects of western sanctions, and plummeting oil prices have caused a decline in Russian tourism to the UAE, with Dubai especially feeling the effects as Russian visitors stay away or cut spending.
Jumeirah Group, the largest hotelier in Dubai with an estimated 30 per cent market share, said that Russian visitors have fallen down the league table of guests at their luxury establishments in Dubai and Abu Dhabi.
Russians were the second biggest category by nationality in Jumeirah hotels last year, equal with visitors from Britain, but now they take a firm third place behind the UK and visitors from other countries in the GCC, Jumeirah said. Saudis top the GCC contingent.
At the same time, there was a significant drop in passengers arriving from Russia and former Soviet countries at Dubai’s main entry hub, Dubai International Airport. Visitors from those countries fell by 8.2 per cent, official figures show.
However, Gerald Lawless, the president and chief executive of Jumeirah, downplayed the effect of the currency slide on Russian tourism, especially at the very top end of the market. “Certainly we are continuing to promote Dubai in Russia,” he said.
The rouble has fallen nearly 40 per cent against the US dollar since the start of the year as western sanctions over Ukraine have hit the Russian economy and had a knock-on effect on its free-spending tourists.
A 9 per cent fall in the currency one day last week was the biggest since the Asian financial crisis of 1998, as international investors took fright at the implications of the falling oil price for the Russian economy, which is heavily dependent on oil revenue.
The Russian government, worried about capital flight as wealthy citizens try to move capital out of the country, has introduced incentives to bring money back in.
Because of the currency peg between the UAE dirham and the dollar, the fall in the rouble translates directly to reduced spending power in the UAE.
Western sanctions have also affected the credit facilities of big Russian tour organisers.
“It has got more difficult for tourists,” said one senior member of the Russian business community, who did not want to be named. “ Russian travel agencies have found it harder to make big block bookings at expensive Dubai hotels.”
Jumeirah said that Russian travellers were tending to book closer to travel – not as much in advance as before the currency fall.
There could also be an impact for retail outlets in Dubai’s malls, especially at the height of the Russian winter holiday season, which is now approaching.
Russian consumers at last year’s Dubai Shopping Festival, spent US$82 million using credit cards, the most of all nationalities, according to figures from Visa, which do not account for cash purchases.
It remains unclear if declining Russian business will hurt the overall Dubai economy. For example, Dubai International Airport’s total passenger traffic continued to rise in October, with a 5.7 per cent increase in departures. The hub is on track to handle 71 million passengers by the end of the year.
Mr Lawless said that revenue per available room – the basic measure of hotel industry performance – was up very slightly over the year, and occupancy was between 80 and 84 per cent.
Declining revenue from the country’s visitors would not be permanent, argued the Russian businessman in Dubai.
“They will be back,” he said. “Western sanctions cannot last forever and they still appreciate all that Dubai has to offer. The UAE has a good relationship with Russia that should not be affected by sanctions.”
Published: December 6, 2014 04:00 AM