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Once known primarily for its towering skyscrapers and world-class shopping malls, Dubai has evolved into a multifaceted tourism powerhouse, where history, culture, and sustainability seamlessly blend with luxury.
This transformation is not just reshaping visitor expectations but redefining the very essence of hospitality in the region. Dubai, in particular, is attracting a growing number of visitors eager to explore historical and cultural experiences.
According to data released by the Dubai Department of Economy and Tourism (DET), Dubai welcomed 18.72 million international overnight visitors from January to December 2024, registering a 9 per cent year-over-year (YoY) increase from the previous record of 17.15 million in 2023.
It’s no doubt that Dubai’s strong reputation for safe travel, hosting major international events, and strong government support has contributed to the city’s attractiveness.
This growth is further reinforced by the Dubai Economic Agenda D33 to strengthen further the emirate’s position as one of the best cities to visit, live, and work.
Within this surge in visitor numbers, the hospitality sector faces the challenge of maintaining the right balance between exclusivity and catering to a diverse market. Luxury hotels have always been a significant part of the UAE’s hospitality landscape. However, there is a growing demand for boutique and lifestyle hotels offering unique experiences and personalised services.
Consequently, Dubai’s hospitality sector is tasked with catering to an ever-evolving visitor profile and adjusting to global uncertainties, such as economic fluctuations and unforeseen disruptions, which affect travel patterns, spending habits, and consumer behavior. Remarkably, Dubai has stepped up to the challenge, reinventing itself and embracing the demand for responsible, curated cultural experiences combined with eco-friendly practices.
A shift to sustainable tourism
The city’s commitment to sustainability is evident as hotels and resorts consider environmental impact in every facet of their operations, including energy-efficient architecture and initiatives aimed at reducing energy and water consumption. This reflects a sense of corporate responsibility but also appeals to the changing preferences of a conscientious global traveler.
More specifically, there is a shift to eco-friendly experiences, like desert resorts and renewable energy projects. Restaurants and food outlets are also adopting eco-friendly practices by incorporating local and organic produce into their menus, supporting sustainable agriculture, and reducing their carbon footprint.
Many hotels and resorts are incorporating wellness-focused amenities and experiences into their offerings to cater to the growing segment of travellers seeking rejuvenation – but with a local touch. In addition, hotels are increasingly looking into healthy food options, fitness classes, spa treatments, and tranquil spaces for relaxation.
Infrastructure investments to support sustainability
Supporting the shift to eco-conscious travel involves investing in the proper infrastructure for it. Dubai is not a stranger to build infrastructure successfully from the ground up, with its hospitality sector playing a crucial role in the city’s tourism success. By the end of December 2024, Dubai’s hotel inventory had expanded to 154,016 rooms across 832 establishments, compared to 150,291 rooms in 2023.
The occupancy rate increased from 77.1 to 77.7 per cent, and the Average Daily Rate (ADR) increased from Dhs654.4 to Dhs666, reflecting the growing demand and the sector’s ongoing contribution to Dubai’s position as a top global destination.
Many of these hotels have embedded technological advancements to enhance the guest experience and support their sustainability ambitions. Data and analytics have become essential tools for hospitality businesses to make informed decisions about everything, from marketing campaigns to menu development.
We now see businesses collecting and analysing data to tap into the workings of customer preferences and trends. Smart hotels that incorporate automation and connectivity to create seamless and intuitive experiences are gaining prominence. This includes offering customised amenities, recommendations, décor, menus, and personalised services based on guest data and preferences. These technology investments have paid off, as KPMG’s latest Dubai Hospitality Report shows that an overwhelming majority, 94 per cent, of respondents were satisfied with their hotel stay in Dubai.
Navigating challenges
Amidst this impressive growth, Dubai’s hospitality sector is navigating a dynamic landscape marked by rising operating costs, increased competition from short-term rentals, and the need for continuous investment in technology and talent. Global economic uncertainty and evolving consumer preferences for sustainability, wellness, and authentic local experiences add a layer of complexity to the hospitality sector.
Additionally, seasonality remains a challenge, as with any market, with fluctuating demand between peak and off-peak months prompting hotels to refine their strategies and optimise operations year-round. Yet, these challenges have become catalysts for innovation, pushing businesses to rethink traditional models, diversify their services, and develop guest experiences beyond the norm.
A bright future ahead
The diversification of Dubai’s hospitality industry is expected to drive it forward in the mid-term. As new types of accommodation, restaurants, and entertainment venues join the mix, this diversification will cater to a wide range of tourists and residents, from budget-conscious travelers to luxury seekers. According to estimates, 11,300 new hotel rooms are expected to open in Dubai by 2027.
Guests are expected to become more price-sensitive. Consequently, hotels will adjust their prices and focus on numbers rather than relying solely on high-spending customers. The price correction could also affect mid-range and budget hotels, reducing their rates to maintain higher occupancy and stay competitive.
Regardless, Dubai’s hospitality industry is poised for continued growth this year. As the city aims to become the world’s most-visited city by 2025, the hospitality sector must think beyond numbers. The future belongs to those who innovate, embrace sustainability, and craft experiences that leave a lasting imprint on travellers’ minds and hearts. The question is: What will this next wave of transformation look like?
The writer is a partner and head of Real Estate at KPMG Lower Gulf.
