Gulf set for 'critical' economic boost as China reopens

UAE and Saudi Arabia among nations expecting demand for oil and goods to rise, with tourism predicted to normalise by 2024

Dubai, United Arab Emirates - May 19, 2019: Chinese tourists on the beach on a cloudy and windy day in Dubai. Sunday the 19th of May 2019. Jumeirah, Dubai. Chris Whiteoak / The National
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Gulf states are set to enjoy a major boost as China reopens, with demand for aviation fuel growing and tourists returning in droves.

Economists and tourism experts predict Chinese visitor numbers will increase to at least the tens of thousands in the coming months, buoyed by direct flights to cities including Dubai and Abu Dhabi.

“China’s reopening and economic developments will be critical for the GCC’s outlook this year, on various fronts,” said Monica Malik, chief economist at Abu Dhabi Commercial Bank.

This week, Chinese expats told The National they will welcome relatives for Chinese New Year for the first time in three years, after Beijing lifted key Covid-19 restrictions on January 8.

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China’s reopening and economic developments will be critical for the GCC’s outlook this year
Monica Malik, chief economist, Abu Dhabi Commercial Bank

Ms Malik said the energy and aviation industries would be among the first to see the benefits from China opening up again, as airlines buy up fuel and Chinese businesses spend big.

“Firstly, it will be central to commodity prices and energy demand in 2023. Increased energy demand from China is core to our Brent crude forecast of $95.0 a barrel in 2023, which if realised, is a very comfortable level for the GCC.

“China will also be important for key non-oil sectors, partly offsetting the expected GDP growth slowdown globally.

“However, support could take some time to build with some countries looking to impose testing requirements for Chinese travellers.”

The easing of Covid-19 restrictions in Asia will be crucial for the aviation and tourism sectors, she added, following the reduction of transit passengers into the GCC as a direct result of restrictions in Asia.

“Direct tourism into the GCC should see a further boost with increased Chinese visitors,” she said.

Before the pandemic it was estimated that about two million Chinese tourists visited the Gulf every year, with Dubai and Abu Dhabi sharing the bulk of that number.

“Chinese visitors around the world contributed $253 billion to the global economy in 2019,” said Julia Simpson, president and chief executive of the World Travel and Tourism Council.

“The recovery of the Chinese travel and tourism sector is very welcome.”

Boost for tourism industry

The news that restrictions on travel from China were being removed was welcomed by the hospitality industry in the region.

Sayed Tayoun, general manager of Holiday Inn Dubai Science Park, said: “With almost three years of lockdown, we expect bookings to ramp up gradually as several Covid-related restrictions are lifted.”

“In the short term, the demand will help drive occupancies in Ramadan followed by the summer months,” he said.

He added that patience would be required at first, as the numbers would not immediately shoot back up to pre-pandemic levels.

“If there is no further interruption from Covid-19 related lockdowns and airlines increase their capacity, I believe we should be reaching 2019 levels of Chinese visitors by 2024,” said Mr Tayoun.

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“One positive from this is that early travellers tend to be the biggest spenders who are eager to shop and enjoy premium services as soon as possible.”

Sean Lochrie, assistant professor at Edinburgh Business School at Heriot-Watt University Dubai, said the city should see a noticeable rise in visitor arrivals in the coming months.

“Chinese tourists are among the highest revenue generators in the tourism industry,” he said.

“Tourists from China generally travel in large numbers and groups, which means higher hotel room occupancy, more purchase power, and increased revenue for various tourism-related industries.

“While numbers might not rise overnight, a gradual increase in travellers from China will be key to boosting positive sentiments across the sector in the UAE and reinforcing the road to recovery.”

One hotelier said the announcement meant hotels in the region would receive a welcome boost this summer, a time when bookings traditionally drop by about 30 per cent amid the scorching hot temperatures.

“It will take about two to three months before we start to see the Chinese tourists coming back in any kind of numbers worth talking about,” said Thomas Kurian, general manager of Leva Hotel, Dubai.

“That’s what the agents I have spoken to are saying and it will be most welcome because you find the numbers of travellers from the likes of Europe drop.”

'Gulf will need more China flights'

Sean Lochrie, assistant professor at Edinburgh Business School at Heriot-Watt University Dubai. Photo: Heriot-Watt University Dubai

One major factor in a return to pre-pandemic tourism levels will be having enough flights to meet demand.

Airlines across the world stripped back services, like many other industries, after pandemic-related travel restrictions.

“We expect to see some impact, but first, the direct flights and charters have to be restored — then of course, we will see a huge surge in bookings and revenue,” said Jan Hanak, managing director of Radisson Hotel Group in the UAE, Bahrain, Oman and Qatar.

“Additional demand from China will be beneficial for Dubai, helping to further strengthen the rates in the high season and boosting the occupancy, albeit at lower rates, in the shoulder [the period between high and low seasons] and low season, where the Chinese market brings additional volumes filling our capacity.”

Last month, Etihad announced it was adding twice-weekly flights from Abu Dhabi to Shanghai, in addition to a weekly service to Beijing and two flights a week to Guangzhou.

Emirates Airline, with four weekly flights to Guangzhou, said in a statement: “We welcome the decision made by the Chinese government to relax Covid-19 related travel restrictions. Emirates is committed to serving the demand for travel in and out of China and looks forward to the rapid recovery of the local travel and tourism sector to pre-pandemic levels.”

Updated: January 13, 2023, 4:09 AM
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