A Signature Media Publication
Tune2Protect

WTTC: The City Travel & Tourism Impact for Middle East

The World Travel & Tourism Council (WTTC) has for the first time produced research that looks at the economic and employment impact of Travel & Tourism in cities with a special focus on the Middle East and Africa market. We present a preview….

image

For over 25 years, the World Travel & Tourism Council (WTTC) has been quantifying the economic and employment impact of Travel & Tourism at the country and regional level. This data is a key source of information for decision-makers within governments, investment banks, academia, and multilateral organisations across the world and particularly within the 185 countries, for which, we provide detailed reports. It allows us to state with confidence the fact that Travel & Tourism is one of the largest sectors in the world, supporting more than 10% of global economic activity and 292 million jobs: 1 in 10 jobs worldwide.

Now, for the first time, WTTC has produced research that looks at the economic and employment impact of Travel & Tourism in cities.

Future growth and success for the sector requires recognising and monitoring trends that will drive future travel habits. According to the United Nations (UN), the urban population of the world has grown rapidly from 746 million in 1950 to over four billion in 2016 and today, 54.5% of the world’s population lives in urban areas. This proportion is expected to increase further to 60% by 2050, with nearly all of the increase concentrated in Asia and Africa. With international tourism arrivals set to rise to 1.8 billion a year by 2030 (UNWTO), and billions more domestic travellers expected, the city share of these arrivals shows particular growth. Understanding the rate and concentration of city tourism compared to country tourism growth is an important need for policy makers.

The research looks at 65 global cities, chosen for being among top ranked for arrivals and spending by visitors. Across all cities in the study, even despite being selected as key Travel & Tourism centres, there are enormously differing levels of importance. Travel & Tourism’s share of city GDP in Cancún, for example, is as much as 49.1%, whereas in Los Angeles, with its much more diversified economy, the sector represents only 1.2% of its GDP. The difference in the share of employment is also just as marked, ranging from supporting 38.5% of all employment in Cancún to just 0.8% in Osaka. With highest levels of growth concentrated in Asia, this research importantly provides forecasts for how these figures may change over the decade ahead.

As the world rapidly urbanises, there is a need to manage that growth with effective planning. A successful city is one where business, infrastructure, resources, and environment meet with quality jobs and effective government support. Goal 11.4 of the UN Sustainable Development Goals calls out the need for cities to strengthen efforts to protect and safeguard the world’s cultural and natural heritage. The role of Travel & Tourism in contributing to this goal in cities cannot be underestimated, both in creating civic pride and jobs, and, on a pure financial basis, through the export revenue generated by international visitors.

Cities are growing increasingly large and influential and are accounting for a greater proportion of global tourism demand.  Based on the readings, the two regions in focus are the Middle East and Africa. Both regions are enormous geographically, extremely diverse culturally and small in terms of Travel & Tourism GDP.

Overview

In 2016, Travel & Tourism for the whole of the 54 countries of Africa, the world’s second-largest and second-most-populous continent, contributed US$66.4 billion or 3.1% of GDP to the economy. Trans-continental Middle East, home to 18 nations, provided 3.3% of GDP or US$81.4 billion.

Collectively these two regions represent only 6.4% of the global economic contribution of the sector. In 2016, the largest Travel & Tourism economies in these two regions, Egypt, South Africa, and Morocco were ranked 39th, 40th, and 42nd respectively, out of 185 countries in terms of their direct GDP contribution, with Travel & Tourism generating over US$ eight billion for each economy.

The majority of the cities included in this study within the Middle East and Africa regions are relatively small in terms of Travel & Tourism market size. However, the sector makes a large contribution to GDP overall and the cities are important centres for the countries. The report looks within countries at the ten cities of Abu Dhabi, Cairo, Cape Town, Dubai, Durban, Lagos, Marrakech, Mecca, Riyadh, and Tehran. These ten cities alone directly contribute 21% of Travel & Tourism GDP for these regions, a proportion forecast to grow to 24% over the next decade.

Cities are important hubs for tourism within countries

The importance of cities as tourism destinations is illustrated by comparing a city’s direct GDP contribution with that for the wider country. Cities with a relatively higher contribution of GDP from Travel & Tourism than for the country are important destinations and tourism hubs within that country, especially for leisure travel.

  • Dubai is the largest tourism city by market size within the region and it is a big hub for both business and leisure travel. It accounts for a majority of Travel & Tourism GDP for the United Arab Emirates (UAE) and overshadows activity in Abu Dhabi despite the latter’s rapid growth over the past decade.
  • In only three of the 10 cities in this study is Travel & Tourism less valuable to the city than to the whole country: Abu Dhabi, Cairo, and Riyadh.
  • The share of GDP generated by Travel & Tourism is lower in Abu Dhabi (2.7%) than for United Arab Emirates as a whole (5.2%). This is partly due to the large oil industry in the city, but also due to comparison with relatively high contribution from Dubai.
  • Cairo is an important centre for business and antiquities and Travel & Tourism contributes 1.7% of the city’s economy. Direct Travel & Tourism contribution to Egypt, including to the main Red Sea resort markets, has a much greater share of the country’s economy (3.2%).
  • Travel & Tourism in Saudi Arabia has had a relatively low profile until the recent 2030 strategy to develop the sector as a key tool for diversifying the economy from oil and gas. Although the capital’s tourism generated US$3.4 billion in 2016, 2.2% of the city’s GDP, its share is lower than the 3.3% that the sector brings to Saudi Arabia.

Reliance on domestic demand raises different risks

Average growth in Travel & Tourism over the past decade has varied considerably across cities related to their diverse source markets. Just as the countries within these two regions are diverse, so too are the sources of demand.

Cities that are heavily reliant on domestic demand can be more exposed to risks in domestic economy. Many of these cities have large internal markets, but international demand could be improved in some cases by better connectivity and a change in policies regarding visas.

  • Lagos is heavily reliant on large volumes of domestic business travel and is exposed to domestic economic fortunes. Domestic traveller spend accounts for 92.6% of the total. Robust growth over the past decade has not been sufficient to significantly raise contribution of Travel & Tourism to total city GDP or employment.
  • Cairo has had a five-fold increase in domestic visitor arrivals over the past decade, the highest rate of increase for all cities in these two regions and second only to Chongqing, China, in the full list of 65 cities studied. As numbers of international visitors fell after terror and security events, the government-sponsored ‘Egypt in our Hearts’ initiative to subsidise domestic holidays for Egyptians is likely to have contributed to growth in the last few years.

The scale of the financial and business services sector in some cities helps to attract business travellers. A large public sector also attracts visitors on government-related business, but GDP generated by these visitors is low compared to that from other output.

  • Among the 10 cities in this study, Marrakech is the one most heavily dependent on international visitor spending. It is a large leisure destination within Morocco, and foreign spending accounts for 90.1% of the total contribution to GDP with France representing one-third of the international market. This is a far greater proportion than the 67.2% of the international spend for the country more widely.
  • As a major airport hub, key stopover destination, and with a small population base, it’s not surprising that the share of international spend in Dubai stands at 87.6%. Domestic visitor arrivals have however tripled (385,800 up to 1.2 million) in the years from 2007 to 2016. Travel & Tourism in Abu Dhabi, also a significant hub but far less of a leisure destination, is evenly balanced between domestic and international spending.
  • Riyadh also has a high reliance on the international market, with 83% of visitor spend from international sources – a share that has doubled in the past 10 years.
  • In the 10 years to 2016, international arrivals tripled in Abu Dhabi and Riyadh, while more than doubling in Tehran. In the past decade, international visitor arrivals have only fallen in Mecca.

Travel & Tourism is an important tool for job creation in cities

Growth in tourism activity can have a disproportionately large impact on job creation. For example, in Mecca, Travel & Tourism directly contributes 7.3% of the city’s GDP, but 11.6% of employment. Nearly 1 in 8 jobs in the city are directly generated by Travel & Tourism. A similar pattern exists in Cape Town, where tourism accounts for 7.5% of city GDP and 10.8% of employment.

In Abu Dhabi and Riyadh, where other industries dominate the city economies, Travel & Tourism employment contributes a higher share of employment than GDP. However, the proportion of the sector’s employment for the city is lower than in the country overall. Large cities in emerging markets often involve a more diverse range of activities than in the rest of the country. These cities follow the pattern in the developed world with lower Travel & Tourism productivity than in other sectors.

In all the Middle Eastern and African cities covered by the research, number of jobs generated by Travel & Tourism will increase over the next decade, highlighting growing importance of the sector as a creator of jobs in the future. In all but two cities, Durban and Riyadh, Travel & Tourism ten-year growth for the city will exceed or match that projected for the country. In Cairo and Marrakech, forecast city employment growth over the next decade is double that expected for the two countries.

Growth cities

Cities in the Middle East saw notable growth in their share of total tourism demand as airlines in the region added routes and grew as hubs for intercontinental travel.

  • Abu Dhabi and Dubai were the fastest growing cities outside of Asia, helped primarily by international demand. They are linked to rising demand from Asia but also benefited greatly from improved connectivity. Both cities are home to important hub airports for airlines on intercontinental routes.
  • There is scope for improved connectivity for many other cities within the Middle East and Africa which would support faster growth in the future.
  • Within Saudi Arabia, investment and construction has increased capacity and connectivity to allow faster growth. Riyadh’s growth rate of 7.9% has been much stronger than that of Mecca at 3.8% but Mecca’s growth is set to pull ahead over the next ten years.

DUBAI

The city has enjoyed strong growth in arrivals and tourism spending, especially from foreign visitors, over the past decade. This has resulted in an increase in the contribution of Travel & Tourism to the city’s GDP from 5.9% in 2006 to 9.4% in 2016.

Growth in foreign demand has been facilitated by improvements in connectivity as number of flight connections has increased for large and growing source markets. Dubai is an important hub for intercontinental travel and many travellers have been encouraged to break their trip with a stay in the city.

Further growth in connectivity as well as developments in visitor attractions should continue to draw visitors to Dubai, and contribution of Travel & Tourism to the city is forecast to rise over the next decade.

However, the rapid growth in arrivals has been undermined in recent years by some lower average spending. Development has occurred ahead of demand growth, partly due to requirement for extra capacity for the Expo2020. Prices for tourism products and services, such as hotel room rates, have fallen and remain relatively low. This extra capacity will ultimately allow the city to meet further growth from large and rapidly-growing source markets. Revenue will recover as pricing and average spending picks up.

Direct GDP contribution from Travel & Tourism – 9.4%

Share of revenue from international spending – 88%

Top source markets:                                      

  • India 12%
  • Saudi Arabia 11%
  • UK 8%
  • USA 4%
  • China 4%

ABU DHABI 

Overview of Abu Dhabi

Abu Dhabi has enjoyed the strongest growth in Travel & Tourism spending and GDP in the region and the fastest growing of all cities in the study outside of Asia over the past decade. Tourism GDP has increased more than threefold since 2006 from US$1.0 billion to US$3.2 billion. Growth has been faster than for Dubai, helped by even greater expansion in connectivity.

Similar to the trend in Dubai, recent growth has been hampered by a reduction in average spending, including falls in hotel room rates as new capacity has outpaced demand. The fall in average spending per day has been more evident than for Dubai.

Slower growth is expected for the next 10 years than over the past decade. Although Abu Dhabi should continue to outpace Dubai in percentage terms, spending volumes and the level of Travel & Tourism GDP are predicted to remain well below that in Dubai due to more limited overall capacity for visitors.

Travel & Tourism as a share of total GDP in Abu Dhabi will also remain lower than in Dubai. The large oil sector in Abu Dhabi is an important influence in this comparison. As the oil price picks up again, the share of GDP generated by Travel & Tourism will fall despite strong growth. However, the Travel & Tourism share of non-oil GDP should increase in Abu Dhabi.

Direct GDP contribution from Travel & Tourism – 2.7%

Share of revenue from international spending – 51%

Top source markets:      

  • India 11%
  • UK 8%
  • China 8%
  • Philippines 6%
  • Egypt 5%

MARRAKECH

The city is a large leisure destination within Morocco and is reliant on Travel & Tourism. It is an important sector for the city, directly generating 27.0% of total GDP.

Marrakech’s tourism industry is highly dependent on international demand, to a much greater extent than in Morocco overall. Spending from foreign visitors provided 90% of Travel & Tourism GDP in 2016. The city attracts a large volume of travel from France: around one-third of international tourist arrivals were from France.

A large reliance on international demand, and in particular from Western European markets, has not helped Marrakech in recent years. Spending has trended downwards over the past six years while the contribution of Travel & Tourism to GDP has slipped from a high of around 37% to the current 27%. Tourism businesses in the city had to cut rates to attract guests as terror attacks in other countries in the region scared off visitors.

Renewed growth from major source markets is essential to support this crucial sector and support jobs in the city. Roughly one in four employees were directly employed by Travel & Tourism businesses in 2016.

The sector was even more important as an employer 10 years ago when it accounted for around one in three employees.

Direct GDP contribution from Travel & Tourism – 27%

Share of revenue from international spending – 90%

Top source markets:                      

  • France 34%
  • UK 10%
  • Spain 9%
  • Italy 7%
  • Germany 6%