An appreciating dollar is making it more expensive for tourists looking to shop in the UAE, and Dubai is likely to lose its coveted “shopper’s paradise” label if the currency pressure persists, says an analyst with S&P Global Ratings.
The dollar has gained 20 to 25 percent in the past year, and more than 40 percent from its 2011 low. Meanwhile, the British pound has fallen 17 percent against the dollar in the previous 12 months; and the Euro, Chinese Yuan Renminbi and Indian Rupee have declined by 3, 7 and 2 percent, respectively.
“Footfalls in the malls are stable, which means every person coming to the mall is buying less than what they used to do in the past, which is not a very good sign, especially for Dubai because it is an economy based on tourism … an economy based on shoppers. We have a shopper’s paradise title, and I think we are very soon going to lose that,” Sapna Jagtiani, primary credit analyst with S&P Dubai, told Arabian Business.
With the dollar strengthening, it is becoming more expensive for shoppers to come and shop in the UAE, the analyst said.
“We aren’t competitive with Europe, and definitely not competitive with the US. If international travellers are coming from Europe and the UK, they are not going to shop in the UAE because it is so much more expensive.”
The profile of the typical visitor travelling to the UAE is changing, Jagtiani said. They are now more “value-conscious” than ever before.
“This thwarts growth in the retail, restaurant, hospitality and entertainment sectors. Therefore, international retailers will need to adjust prices in the market to keep shoppers spending,” she said.
While Dubai’s Department of Tourism and Commerce Marketing (Dubai Tourism) said this month that the emirate welcomed 14.9 million overnight visitors last year, a five percent increase on 2015, it has yet to announce the retail spend by tourists’ during the 2017 edition of the Dubai Shopping Festival, which ran from Dec 26 to Jan 28 and is a key barometer to predict the retail/tourism outlook for the year.
“Footfalls are the same despite tourist [numbers] going up. We also have a lot more supply with 15 new malls coming up, and then the numbers of tourists are not growing at the same pace. There is going to be pressure,” Jagtiani said.
Global consultancy CBRE said Dubai will see an additional 900,000 square metres of retail space between 2017 and 2019 (to the existing three million square metres) with new malls set to open at Dubai Creek Harbour, Meydan One, Jumeirah Central and Deira Islands.