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Economic Factors of Dubai Tourism Demand Essay

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Updated: Apr 16th, 2020

Introduction

Unlike macroeconomic policies that deal with aggregates of the entire economy like unemployment, inflation, and gross domestic product, microeconomics deals with the study of individual economic parts. Decisions made by households and the firms in the allocation of limited resources normally comprise the majority of microeconomic policies.

The decisions affect each in a cyclical way. Decisions made by firms and consumers affect the supply and demand for goods and services. Prices are determined by the direction of supply and demand effectively determining the number of goods and services demanded and supplied. All the above activities rely heavily on microeconomic policy decisions like taxation that governments make.

In the pursuit to create an all-round economy, different nations and territories have come up with plans to boost different sections of the economy like manufacturing and services. Tourism forms a critical component of the economy and nations like United Arab Emirate have developed numerous plans to boost their tourism especially through future cities like Dubai. Dubai is seeking to develop a future economy with tourism and inward investment co-existing (Page 2009).

Tourism in Dubai

Many factors have played to Dubai’s favor as it seeks to carry out the above-mentioned plan. Besides developing world-class infrastructures like roads, airports, and hotels Dubai has sought to develop theme led plan that includes ecotourism, sports, culture, shopping and conference exhibitions(Page 2009).

Under these themes are supportive activities developed by individual people and firms to attract tourists to the area. Tourist developers target the spending that comes with many visitors, business booms from the spending visitors, employment for the local population as well as the expatriate population that comprises the majority of Dubai residents and the revenue through taxes that authorities collect from the various activities that tourists undertake in the area.

Economic Factors influencing tourism in Dubai

Tourist spending

Millions of tourists visit Dubai every year and the free economic zones and the generally low retail prices of commodities encourage spending. These businesses collect huge profits which are not taxed at all by the Dubai authorities.

Employment

The high demand for tourism services calls for a big workforce in to serve the big clientele. Employment in the sector has thus boosted the growth of the economy and the rise in living standards of the residents

Revenue

Though incomes are not taxed, the government collects revenue from other sources like value-added tax. The primary aim of low taxes is to encourage development in tourism and a large pool of investors ensures more sources revenues for the authorities.

Growth of the economy

High spending by tourists raises GDP of the emirate. Therefore, the combined policies pursued by the Dubai authorities aim to boost the economy through a high turnover of economic activity.

Within the favorable microeconomic environment and the development themes that the authorities have made, developers in Dubai have been able to set up world-class working environments, excellent accommodation facilities, exceptional travel facilities, shopping and entertainment complexes, cultural and heritage sites offering rich experiences to visitors and creating huge demand for new and world visitors.

Economic Themes and Facilities Development

World-class Working environment

Dubai has developed an environment-friendly to business and the employees who work for the businesses. The Emirate has created economic free zones which offer no taxation on income, no foreign exchange controls, free easy and stable convertible currency and strategic location bringing together time zones like Europe, Far East, and Africa. The conducive business has enabled many Multi-National Corporations, including those of tourism to set shop in Dubai, greatly boosting tourist activities.

Accommodation Facilities

The high demand and anticipated rise in demand for accommodation facilities have given rise to the development of accommodation facilities comparable to none. Most of the population of Dubai is expatriate.

They seek accommodation facilities as residents as well as tourists. According to the Department to Dubai Tourism, the booming property has seen the development of hotels, hotel apartments and restaurants serving tourists from all over the world. This has seen the rise in the number of hotels from 197 to 300 in 2005 (Page 2009). Many more have come up during the five years from 2005.

Transport facilities in Dubai

Dubai sports international airports, good roads and luxury gateways to the sea. These, together act as major attractions to the tourist who would like to visit the Emirate. The Dubai International Airport is located in the city center for easier access of visitors to their accommodation places.

It is one of the busiest airports in the world serving over 35 million visitors per year. Playing a big role in air travel is Emirates Airlines which serve over 150 destinations in the world. There is a cruise terminal set up in 2007 that served over 53,000 guests in the first three of the year 2007 (Lis 2009). The developed network of high-quality highways offers a very convenient gateway to Dubai (Lis 2009).

Shopping and entertainment

One of the major attractions in Dubai tourism is the development of sporting and entertainment tourism facilities. The Emirate sports major shopping malls offering virtually everything a tourist would require anywhere in the world. According to the Dubai department of tourism, the clientele for these malls is mainly regional and foreign. There are malls with deferent themes and traditional markets popularly referred to as Souks (Oxford Business Group 2008).

Tourists get to sample goods on offer at the Souk and bargaining is easier compared to the malls. The low import duties levied on goods entering Dubai mean the retail prices of commodities in Dubai are very low.

Besides the fine restaurants, the emirate has several clubs that serve different clientele from the US to Europe and Africa. In sports, Dubai offers many sports choices for tourists for competitive or leisure participation. The Dubai formula one grand Prix, golf and various football academies by top clubs like Manchester United characterize the Dubai Sports landscape.

Culture and heritage

Visitors to Dubai experience a vast cultural area that offers rich experiences on Dubai’s past heritage. The cultural attractions include exhibitions about Dubai’s history, Traditional culture and lifestyle, clothing and jewelry and occupations of the past. The sites have been developed by investors keen on cashing in from culture lovers.

Discussion

Every aspect of the above attractions in Dubai has lined a microeconomic value that makes it possible for its success. Taxation decisions by the government of Dubai have largely played a large part in the success of Dubai tourism. Both businesses and individuals have found it easy to operate within the economic environment of Dubai. The policy not to tax incomes of businesses in the area and the low import levies on goods entering the emirate has spurred development of tourism facilities.

Shopping malls too have stocked low price items because of the low tax policies. There are also the economic free zones where incentives have been offered for business owners to enjoy tax holidays and develop tourist facilities. The policies have encouraged spending by tourists which in turn have enormously boosted the revenue levels of the Dubai government (Oxford Business Group 2008).

The presence of many businesses in the emirates has attracted a large pool of foreign expatriates plying their trade. Low taxes and a wide variety of economics choices make Dubai an attractive place to stay. Accommodation facilities have thus gained form the growing population of the emirate boosting the property market with new hotels being constructed every year.

Conclusion

There are other factors like the security that make Dubai an attractive tourism investment. The city is virtually crime free, a factor which is critical if any success is to be realized in business. Micro-economic policies that the government of Dubai is going to take will be crucial in determining the direction tourism will take. Low taxation to create high demand and supply is still necessary to ensure the sector grows. It’s also important that the tourism authority in Dubai explore other options.

Offering economic incentives to encourage other sectors like medical tourism will go a long way in boosting tourism in Dubai. With neighboring Qatar and Oman contemplating tourism master plans similar to that of Dubai, it is imperative to package the emirate as the premier tourist destination in the Middle East. It has already established itself as such but a lot more will be needed to maintain the position.

References

Department of Tourism and Commerce Marketing. Web.

Lis, S. (2009) Dubai, from the Scratch Until Today – A New Vision of Tourism? Norderstedt, GRIN Verlag.

Oxford Business Group (2008) The Report: Dubai 2008. Oxford, Oxford Business Business Group.

Page, S. (2009) Tourism Management: Managing for Change. Burlington, Elsevier Books.

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