finance

Industry of UAE

Submitted by

Aditya Kaul

AUD-7934

BBA GENERAL (finance)

SEM 6

AMITY UNIVERSITY DUBAI

Batch No. (2017-2020)

DR Ashok Chopra

(Associate Professor Management & Commerce)

ABSTRACT

United Arab Emirates is one of the nations in the world whose tourism industry is suffering due to the COVID-19 pandemic. Hotels, restaurants, tourist destinations as well as other areas that are supported by the tourism industry have been negatively affected by the pandemic. Some hotels have been forced to shut down whereas those still in operation have an occupancy rate that is below 10%.

In a bid to understand how severe the tourism industry of the UAE has been affected; researchers carried out a study. The study used a mixed-method approach. 70 participants participated in the study. The 70 participants compromised of hotel and restaurant owners, hotel managers, and employees in the UAE tourism sector. The participants were asked 8 questions that regarded the COVID-19 and how it affected their businesses and their employment status.

According to the data collected and the analysis, the tourism sector has been greatly affected by the COVID-19 pandemic and this is information confirmed by hotel managers, hotel owners, and employees in the diverse tourism industry. The majority believe that the effects of the pandemic are negatively affecting the industry. The stay indoors and the travel restrictions have made it impossible for both local and foreign tourists to tour the nation. The social distancing instructions have also limited the hotels' and restaurants' business operations as they have to limit the number of people that they can serve. In an attempt not to declare bankruptcy and salvage their financial statuses, most organizations in the tourism industry have temporarily let go of their workers.

Despite reducing the number of employees, most organizations foresee them closing down in a month if the situation does not change. Most organizations believe that the government can intervene and save their operations during the pandemic period. Out of the suggested programs, most respondents suggested that cash waivers, employment programs, reduction of tariffs on imported inputs are some of the best strategies that the UAE government can implement to give their organizations a fighting chance.

Table of Contents Introduction 6 Travel and Tourism 7 Literature Review 9 Research Methodology 13 Research Objectives 14 Data Analysis and Interpretation 15 T-test analysis. 30 FINDINGS 32 Conclusion 33 References 34 ANNEXURE 35

In the United Arab Emirates, oil production and export are the significant sources of economic stabilization. Tourism is second to oil and export. Tourism is the country's main non-oil revenue stream. The UAE's tourism sector prospered, because of a massive construction boom and a flourishing service sector in some of the world's luxury hotels, the expansion of the manufacturing base. The recent pandemic caused the national economy turbulence because it not only affected the production and export of oil but also hampered tourism. Some of the significant impacts observed in the country include the sudden drop in domestic and external demand for commodities and products, notably crude oil, the decrease in crude oil prices, the stoppage of labour production. Also, foreign visitors have been urged to fly as local tourists to avoid the spread of the disease as a result of the COVID-19 pandemic.

The WTC has warned of the pandemic COVID-19, which could reduce worldwide 50 million travel and tourism employees. After the outbreak is over, the industry will recover for up to 10 months. Today, tourism accounts for 10% of worldwide GDP. It's an essential part of the UAE economy. Travel and tourism studies are expected to add approximately “Dh312,4 billion to the GDP of the UAE by 2027. The industry is part of the company backbone with its workers. Based on current trends, unless government assistance is provided immediately by companies in this industry, their chances of surviving the outbreak of coronavirus are slim, even if they grew at a commendable rate before the eruption” (Hill, 2020).

The coronavirus outbreak poses risks for up to 50 million workers in the global transport and tourism industries. Fortunately, while the virus was still in its infancy, the United Arab Emirates began to implement social distancing measures. The nation registered more than 26,000 infections with 233 deaths as early as 21 May 20120. COVID 19 is going to worsen economic splits in the US because of its tens of thousands infected in the world and the loss of hundreds of lives.

The impact is currently being felt, but in three months it will be felt most if there is no way to resolve the pandemic. Tourists evaporated the situation, and a flight and a lock-down ban were introduced. With the UAE cancelled their Expo 2020 and Saudi Arabia, which did not permit an annual haj pilgrimage, the UAE lost hundreds of millions of dollars due to touristic activity. This has been expected. Twenty-five million visitors were expected by the UAE to attend the Expo 2020 event in October 2020.

“The UAE has important revenues as air transport is home to Emirates, the world's largest long-distance airline, and a hub for other major regional airline companies such as Etihad Airways and Air Arabia. Air travel accounted for $19.4 billion or around 5 percent of UAE GDP last year, according to a 2019 survey by the International Air Transportation Organization. This figure is doubled by tourism”. More than 11% of UAE 's GDP was represented by the World Travel and Tourism Council in 2018. When more flight controls fall into force, both carriers would have to clean up. As international travel nearly surely will be severely disturbed until the second quarter of 2020, this will be a key economic element in the UAE. Actions in Air Arabia decreased in the period before they recovered slightly in the following days, down to 1.08 AED during a Monday trade session. Currently, they are less than 30% by year.

Stopping Flights-One of the hundreds of related hotels confronted by related tension in Dubai, where employments have fallen to 20%, has tourism accounted for more than 11% of GDP and offers funding to the shopping, transport and building sectors. After the world's pandemic hit, the hotel took an unpaid leave of 300 employees and brought the United Arab Emirates to a closer audience to its pool bar and beach club. Dubai is the 3rd largest town in the world with direct international expenditure on tourism, with US$ 28 billion in 2019, the World Travel & Tourism Council said. Last year, the government said, more than 16 million visitors visited the region. Just before the UAE halted all passenger flights, with the exception of evacuations, State Emirates airline, which reported 862 million dirhams (234.70 million dollars) in earnings in the first half of 2019, stopped passenger flights. Dubai, the most fragile economy in the UAE, may be pushed into debt reduction through coronavirus travel curbs or receive support from UAE capital Abu Dhabi. Capital Economics puts Dubai's debt load at about 135 billion dollars (125% of GDP). In the global lending crisis that has struck Dubai's real estate market crash, Abu Dhabi launched the second time last year a $10 billion loan to Dubai. In the UAE economy this is usually negative. In the first week of March, hotel occupancy rates in the UAE, a federal government of seven emirates, declined by 28.2% year on year, with income from the analytics specialist STR falling by 43%. The spread of the disease puts at risk the EXPO 20 world trade fair in Dubai, which will host 20 million tourists from October. „ In a statement to Reuters, Marriott International said that some of our properties in the UAE have been temporarily closed.

Chinese tourists, who until recently thronged the city’s main tourist attractions, are largely absent. Shopping malls in the city are noticeably quieter and taxi drivers lament a lack of customers. Hotels have slashed rates in a bid to sustain occupancy, with some reportedly asking staff to take leave to cut costs through the downturn. Technically the outbreak has prompted the cancellation or postponement of a host of other events in the UAE, from music festivals and business conferences to Art Dubai, the Gulf’s most prominent art fair.

“In order to carry out literary search, the researchers have implemented efficient literature search techniques and strategies such as keyword and boolean operators' techniques together with strategies such as the recent literature.” “The most effective method for literary quest is to use keywords to scan the relevant literature. In few integral steps the literature search was carried out: the formulation of questions, the definition of the key concepts and keywords, the selection of databases, a search and evaluation of the search results, and finally selection of the most relevant literature for the study and important study information.”

The question was broken up in several parts in order to find the main concepts of the research in the keyword search. In order then to search the essential literature, the “keywords and their entire synonyms and acronyms are used.”The keywords are UAE and pandemic COVID-19. In order to find the necessary literature, in addition to the keyword method, the boolean operator method is also used. The key secondary details were gathered from Ebsco and other reliable online repositories databases. After a thorough literature review, one article was identified that represents UAE’s tourism industry status in light of the COVID-19 pandemic.

“Dubai braces for a financial hit as coronavirus batter’s vital tourism”

In an article published in March 2020, the article looks at how Dubai and generally the UAE ‘s tourism industry is affected by COVID-19. According to the article, tourism in Dubai accounts for 11% of GDP as well as supports the construction, the transport and retail sectors (Aziz & Barbuscia 2020). Furthermore, the article quotes the World Travel & Tourism Council by stating that Dubai is the third-largest city in the world in terms of attracting direct international tourism. According to the report by the council, over 15 million tourists visited the city in 2019.

In a study of the city after the pandemic breaks out, Yaakoubi and Barbusia, the authors of the article stated that most of the hotels in Dubai have closed and the occupancy rates have fallen to only 10%. In a bid to counter the effects of the pandemic, some hotels have been reconfigured to space out sitting arrangements. Furthermore, they sanitize all hotel employers in an attempt to build confidence in potential customers. The authors of the article managed to capture the response of a hotel manager that they interviewed. The hotel manager believes that the hotel industry and extension of the tourism sector in Dubai will be greatly affected and that the effect of the pandemic will last the whole year.

“The Impact of Coronavirus on the U.A.E Economy”- Giles Coghlan

No matter how late this declaration might or might not have came into effect, at least this warning raise will now encourage the governments to take the problem seriously and to intensify their attempts to deter its spread.

It is also generally recognized that changing the outbreak curve correctly is our best chance to hold the virus clear of crippling national healthcare systems. As more evidence on the epidemiology of the epidemic appear, we are best able to cope with it and provide about the victims.

Those past unknowns are slowly transforming into information such that our attempts to suppress Covid-19 have multiple repercussions for our highly interlinked world economy. Many stocks are already already in correction mode with others now joining the bear market. For the U.A.E, we will now separate the effect on transport and trade, services and the influence on Emirati community.

The United States is a tightly organized, well-funded, technically developed and cohesive community with respect to social consequences. This improves the probability that drastic steps against Covid-19 would at least slow down its dissemination. It has acted rapidly to disinfect public spaces and to mount thermal cameras, prohibit Shisha, cancel broad gatherings, close down education institutions and restrict priestly hours. Like we have learned in many countries such as Singapore and Hong Kong, concerted protests are crucial to stopping the transmission of the virus.

Transportation by air is an significant source of income for the UAE, host to Emirates, the world's largest long-distance airline, and a hub for other big regional carriers including Etihad Airways and Air Arabia. Air travel accounted for 19.3 billion dollars, or about 5 percent of the U.A.E 's GDP last year, in the 2019 study by the International Air Transport Association. When you even add to tourism, this number more than doubles. Throughout 2018, the National Travel and Tourism Committee paid for more than 11% of the US GDP.

Both airlines may have to face cancellations as new restrictions on flights become important. With world transport almost definitely severely affected by the second quarter of 2020, that would undoubtedly be an important aspect of the U.S. economy. Air Arabia shares declined to below 1.08 AED during the trading session on Monday until they improved marginally in the following days. Today, they are more than 30 years out to date.

The positive thing is that the aircraft sector of the USA is definitely more positioned than that in other countries to deal with the coming crisis. For eg, the 12-month quick trailing ratio of Air Arabia (liquid assets separated by accumulated liabilities) currently stands at 1.24 (more specifically, ratios below 1.1 are unwanted).

In comparison, Southwest Airlines, which is the world's biggest low-cost carrier, has a 12-month trailing strong average of 0.61. The fast ratio of Air Arabia is therefore slightly higher than the average of 0.29 for the aviation sector and should thus be much more prepared to handle this impact.

“The research implemented the mixed approaches methodology. It used both qualitative and quantitative research methods. The researcher collected data through interviews and questionnaires. In terms of indicators, the evaluation aimed to draw on different types of indicators (i.e., latest inputs, outputs, outcomes, impacts,) to reflect the key results in the disease’s theory of change.” “Impact evaluations of (COVID-19) should ideally use the indicators that were selected for monitoring performance throughout the disease implementation period, and how coronavirus pandemic has spread across the UAE and the world in general. The researcher employed and linked data collection instruments, including surveys, for assessing COVID-19-relevant Behavioral and Social Science (BSSR) domains for clinical or population research where participants voluntarily gave their feedback.”

The researcher also observed COVID-19 related Lifestyle Change (work, sleep, school, testing positive, family, and exercise) and how this has impacted tourism and travel in the UAE. Analysis of disruption to daily activities and social interactions; how the pandemic has impacted routines, social activities, and interactions. Financial Hardship; how the COVID-19 pandemic has affected finances and created and/or exacerbated financial hardships reduced both local and international tourists. Scrutinized perceived benefits; how experiences with the pandemic have led to any perceived benefit or positive contribution and counter the opposite too. Functional social support; access to availability and use of social resources during the pandemic has impacted the tourism industry. Finally, accessed perceived stress management and the ability to manage stress and how this has influenced the ability to implement skills to manage pandemic related stressors. The researcher also looked at trends in social media platforms and media houses for related data.

70 participants participated in the study. The 70 participants compromised of hotel and restaurant owners, hotel managers, and employees in the UAE tourism sector. The participants were asked 8 questions that regarded the COVID-19 and how it affected their businesses and how it affected their businesses and their employment.

“The objective of this study is to measure the impact of the occurrence of Covid-19 on the tourism industry in the United Arab Emirates.”

The report will cover:

• A comprehensive research methodology of the pre- and post-COVID-19 impact on the UAE economy based on tourism.

• A detailed and extensive tourism market overview with key analyst insights.

• An exhaustive analysis of macro and micro factors influencing the tourism market guided by key recommendations.

• Analysis of regional regulations and other government policies impacting the UAE economy in regards to tourism.

• Insights about international tourism market determinants which are stimulating the UAE economy.

• Detailed and extensive tourism market segments with regional distribution of forecasted revenues.

What is the main sector of activity of the business? And what does it involve?

Data Interpretation

Most respondents were certain that the organizations they worked for were registered business

From which types of customers do you generate the most income from?

What field of tourism does your company primary deal with/ services or products that you offer?

Data Interpretation

Most respondents were from the hotel and accommodation services and the desert safari tours and activities fields of the tourism sector.

How many full-time employees does the business have?

Data Interpretation

Most of the respondents indicated that their businesses have between 100 to 249 employees in their places of employment.

Have your business operations been affected by Coronavirus (COVID- 19) pandemic if yes? How?

Data Interpretation

The majority of the respondents have been greatly affected by the COVID-19 pandemic.

How has the coronavirus (COVID-19) pandemic affected the ability to offer services or sell your products?

customers cannot access facility for services or products

business cannot open premises for service delivery or sell of products

Data Interpretation

Most of the respondents said that the measures to protect the general public implemented by the government had hampered operations.

Data Interpretation

Out of 70 respondents, most respondents claimed that the clients cannot access services and products due to stay at home orders.

Have you adopted any of the following strategies to cope with the crisis?  (multi-select)

Data Interpretation

Out of 70 participants, most respondents said that their businesses temporarily reduced employment to avoid business losses

Based on the current trends, do you think there is a risk that your business will permanently shut down because of this crisis, and if so, when is it likely this closure will occur?

1 month or less

Data Interpretation

Most of the respondents suggested that their businesses be closed within the month

Please select the top three government measures that you believe would be most helpful as you cope with the COVID crisis.

Data Interpretation

Out of the suggested programs, most respondents suggested that cash waivers, employment programs, reduction of tariffs on imported inputs, and other services like rent waivers would be most helpful during the pandemic.

According to the data collected and the analysis, the tourism sector has been greatly affected by the COVID-19 pandemic and this is information confirmed by hotel managers, hotel owners, and employees in the diverse tourism industry. The majority believe that the effects of the pandemic are negatively affecting the industry. The stay indoors and the travel restrictions have made it impossible for both local and foreign tourists to tour the nation. The social distancing instructions have also limited the hotels' and restaurants' business operations as they have to limit the number of people that they can serve.

In an attempt not to declare bankruptcy and salvage their financial statuses, most organizations in the tourism industry have temporarily let go of their workers. By so doing, the organizations have reduced their wage bills. Despite reducing the number of employees, most organizations foresee them closing down in a month if the situation does not change. Most organizations believe that the government can intervene and save their operations during the pandemic period. Out of the suggested programs, most respondents suggested that cash waivers, employment programs, reduction of tariffs on imported inputs are some of the best strategies that the UAE government can implement to give their organizations a fighting chance.

Airlines planned for a 3.5% rise in the international seating capacity of 3,2% in 2020 and a 3.7% increase in domestic seating capacity in comparison to 2019 before the outbreak. According to the latest estimates, the capacity of passenger seats could fall by 32% from above to 59% (international by 38%, 71%; domestic by 28%, 51%). This amount of capability will be 30% to 58% (internationally 36% to 70% and nationwide from 25% to 49%) below 2019. The US Central Bank reported a $27 billion in funding for banks as a boost for the economy, while Dubai proposed special opportunities in the oil, banking , retail and tourism sectors for a total of $409 million. Specific governments have since started to supply their corporate associates and vendors with service packages. The recent travel constraints placed to curb the outbreak, according to Aljazeera, may present a major danger to the UAE hospitality and tourism industry, which is scheduled to host Expo 2020 in Dubai and draw 11 million visiters into the region. However, such predictions are largely speculative. The UAE has implemented a variety of policies which seem to prevent complete outbreaks on its territories and to preserve its crucial business relations with Asia. While there have been medical and economic consequences in many nations throughout the world over recent weeks and Southeast Asia has been a severe blow, the UAE is a balance that can and should be replicated.

Two tailed T-test was studied based on questionnaire and level of expectation and level of experience was studied by the use of questions and scaling the answers on 5-point scale.

Table 1 Perception scores of positive tourism impacts

Level of confirmation Level of disconfirmation

Perception scores are based on 5-point rating scale.

*p < 0.05; **p < 0.001 (2-tailed test); Degrees of freedom = 79.

Table 2 Perception scores of negative tourism impacts

Level of confirmation Level of disconfirmation

Perception scores are based on 5-point rating scale.

*p < 0.001 (2-tailed test); Degrees of freedom = 79.

“Confirmation scores of the positive tourism impacts pertaining to the level of expectation and the level of disconfirmation of the tourism business community shown in Table 2 reveal that none of the above eight positive impacts is fulfilled as per their expectation”. “The reasons for the expectations of the tourism business community on positive impacts not being met might be due to the impact of COVID-19 on eliciting the perception of only tourism business community. Tourism business community, as common sense dictates, will generally have higher expectations than the common people in respect of revenue generation, employment generation, investment in tourism business, development of basic infrastructure, etc.”

The Abu Dhabi Government has announced the suspension of tourism and municipality fees for the tourism and entertainment sectors until the end of this year. Restaurants have been authorized to resume activity with 30% capacity since April 24th in an attempt to secure its tourism sector.

Other possible solutions from the government during and after the pandemic to help boost the tourism industry are:

a) “The government should provide cash loans equivalent to a minimum of three months of working capital. The release of these funds can be micromanaged based on a month-on-month analysis of the budget.”

b) “The government should waive mortgages, loans, and credit card payments for at least three months until the industry recovers from the pandemic. They should also do the same with credit card repayments.”

c) “companies would be applicable for zero visa costs if they hire any new employees in the next six months. This will be a boon for the looming high unemployment rate”.

d) The cost to renew licenses would be waived off for this year.

e) “Utility and housing fees could be cut by half for vacation rental homes, which will allow investors to save money to survive these tough times”.

In order to create and maintain the successful UAE tourist industry small businesses have played a major role with vacation rentals in the best form. If they don't have the support they need, they probably won't be here for a long time. The Government of the United Arab Emirates has always supported the SME industry, which has made it a success story. The government of the UAE has a larger position in these difficult times to protect its population not just from the pandemic but also to protect its economy from the impact of the pandemic. The emeriti are in several respects distanced from the break-up of the epidemic, but the businesses require some fuel to survive this hurricane. This thesis explores the effect of the pandemic on the tourist industry in the United African States. It also explained the damage to the national and international economies caused by the pandemic. In the best interest of the UAE in securing its tourist industry to give the economy a fighting opportunity, even as there are worrisome trends in relation to the pandemic, and its effects.

Aguiar, Angel, Maksym Chepeliev, Erwin L. Corong, Robert McDougall, and Dominique van der Mensbrugghe. 2019. “The GTAP Data Base: Version 10.” Journal of Global Economic Analysis 4 (1): 1–27. https://doi.org/10.21642/jgea.040101af.

Aziz E. Y & Barbuscia D. (27 March 2020). Dubai braces for financial hit as coronavirus batters vital tourism. www.reuters.com/article/us-health-coronavirus-emirates-tourism/dubai-braces-for-financial-hit-as-coronavirus-batters-vital-tourism-idUSKBN21E1R0

Brahmbhatt, Milan, and Arindam Datta. 2008. On SARS type economic effects during infectious disease outbreaks. World Bank Policy Research Paper No. 4466, World Bank, Washington, D.C. http://documents.worldbank.org/curated/en/101511468028867410/On-SARS-type-economiceffects-during-infectious-disease-outbreaks.

El-Erian, M. (2020). The Coming Coronavirus Recession and the Uncharted Territory Beyond. Foreign Affairs, Media Report. Available at: https://www.foreignaffairs.com/articles/2020-03-17/coming-coronavirus-recession

Hill, Andrew, and Emma Jacobs, “Covid-19 May Create Lasting Workplace Change,” Financial Times, February 27, 2020. https://www.ft.com/content/5801a710-597c-11ea-abe5-8e03987b7b20

McKibbin, Warwick, and Roshen Fernando. 2020. “The Global Macroeconomic Impacts of COVID-19.” Brookings Institute, no. March: 1–43. https://www.brookings.edu/wpcontent/uploads/2020/03/20200302_COVID19.pdf.

Turak, Natasha (29 January 2020). First Middle East cases of coronavirus confirmed in the UAE CNBC.com

"UAE CORONAVIRUS (COVID-19) UPDATES". UAE's national emergency crisis and disaster management authority. "Dubai's Emirates cuts passenger flights to 13 destinations". 22 March 2020

“The Impact of Coronavirus on the U.A.E Economy”- Giles Coghlan

QUESTIONNAIRE

What is the main sector of activity of the business? And what does it involve?

Agriculture

Mining and natural resources

Agri-food processing

Non-food manufacturing

Retail and wholesale

Travel and transport

Accommodation and food services

Information technology

Finance

Other services, please specify

Is this establishment currently registered with or licensed by a national authority?

Yes, registered business

Freelancing / independent / consultant

No, unregistered business

Do not know

From which types of customers do you generate the most income from?

Foreign tourists

local tourists

government activities/ conferences

Other services, please specify:

What field of tourism does your company primary deal with/ services or products that you offer?

sky diving

hotel and accommodation services

desert safari tours and activities

Site seeing services

merchandise selling

other

How many full-time employees does the business have?

0

1-4

5-19

20-99

100-249

250 and more

Have your business operations been affected by Coronavirus (COVID- 19) pandemic if yes? How?

Not affected

Slightly affected

Moderately affected

Strongly affected

How has the coronavirus (COVID-19) pandemic affected the ability to offer services or sell your products?

customers cannot access facility for services or products

business cannot open premises for service delivery or sell of products

measures to protect the general public has hampered operations

delivery of products by local suppliers has been hampered

delivery of products by international suppliers has been hampered

employee’s health has been compromised

government has quarantined premises

the pandemic has not affected operation

How has the coronavirus (COVID-19) pandemic affected your enterprise? (multi-select)

Temporary shutdown

Employee absences due to travel restrictions

Clients cannot pay for services or buy products

Reduced cash flows

clients cannot access services and products due to stay at home orders

others specify

Have you adopted any of the following strategies to cope with the crisis? (multi-select)

Temporarily reduced employment

Laid-off employees

Loaned employees to other enterprises

Teleworking

Rescheduling of bank loans

Increased marketing efforts

Based on the current trends, do you think there is a risk that your business will permanently shut down because of this crisis, and if so, when is it likely this closure will occur?

1 month or less

3 months

6 months or more

Business closure not envisaged

Please select the top three government measures that you believe would be most helpful as you cope with the COVID crisis.

Employment programs (e.g. temporary unemployment programs or social security waivers)

Financial programs, such as low-interest credit line or credit guarantees

Tax waivers or temporary tax breaks

Reduction of tariffs on imported inputs

Rent subsidies

Cash transfers

Other services, please specify:

Is this establishment currently registered with or licensed by a national authority

Sources that generate the most income

Field of tourism represeneted by the respondents

How many full-time employees does the business have

The ability to offer services or sell your products

customers cannot access facility for services or products business cannot open premises for service delivery or sell of products measures to protect the general public has hampered operations delivery of products by local suppliers has been hampered delivery of products by international suppliers has been hampered employees health has been compromised government has quarantined premises the pandemic has not affected operations 10 3 20 5 15 7 5 5

Has the coronavirus (COVID-19) pandemic affected your enterprise

Have you adopted any of the following strategies to cope with the crisis

When could this closure occur?

Government Measures That Would Be Most Helpful As You Cope With The COVID Crisis

1

Tourism