Virus outbreak makes Dubai economic crisis more biting

By Arabian Post Staff

Already struggling to grapple with a crisis of unprecedented proportions, the coronavirus outbreak is the last thing that Dubai and the UAE would have liked to see happen.

Moody’s noted in one of its latest reports that the timing of the outbreak is particularly bad for the hospitality industry because it is has unfolded as the Lunar New Year gets underway. The holiday is one of Asia’s busiest travel times of the year, with hundreds of millions of passengers traveling within China and abroad to vacation and visit family.

The UAE has already confirmed its first cases of coronavirus patients, with the authorities screening those who may have come into contact with the five patients detected with the virus. But its economic impact is likely to be much more significant than the health risks.

Dubai has been mounting special campaigns to attract Chinese travellers, who have replaced Russians and Indians as the high-spenders in the emirate’s tourist attractions, including glitzy shopping malls. Dubai is one of the favoured destinations for Chinese tourists with more than 2.8 million tourists in 2018, as per figures released by the General Directorate of Residency and Foreigners Affairs.

In fact, passport control officials in Dubai are improving their Chinese language skills to greet rising numbers of tourists from China.

Preliminary reports from China indicate that travel fell sharply on 25 January, the first day of the Lunar New Year. According to a transportation ministry official in China, overall passenger travel decreased 29% and air passengers were down 42%. It is unclear how long and how extensive the travel decline will be now that other countries are warning against unnecessary travel to China while the scope of the outbreak remains unknown.

The outbreak is a big threat to the hospitality industry. Many have started to compare this situation to the severe acute respiratory syndrome (SARS) virus that originated in China and killed nearly 800 people in late 2002 and early 2003.

According to Moody’s, hotels in many Asian regions experienced double-digit RevPAR declines in 2003 related in part to the SARS epidemic. During late 2002 and early 2003, airlines cut routes in the region, conferences were postponed or cancelled and overall leisure travel fell precipitously. The agency says that because of the fast growth at which the Chinese lodging market has grown in the past 10 years, the lodging and cruise companies have materially more exposure to the Chinese market today than in 2003.

Moody’s believes that the economic impact of the outbreak on China will reverberate globally, given the importance of China in global growth as well as in global company revenue. By sector, the coronavirus will likely have the largest negative impact on goods and services sectors within and outside of China that rely on Chinese consumers and intermediary products.

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