Business Travel in the Middle East Facing Challenges
Business travel in the Middle East is expected to gradually recover following a slowdown in 2015 as a result of declining oil prices, security and political issues and the impact these had on regional investments and less business being conducted between countries across the region. The region is highly dependent on the performance of the oil industry, which reflects the foreign direct investment to the area and translates into business tourism spending.
The turbulence in the region and fluctuating oil and gas prices has required many of the markets in the region to re-evaluate operational costs, decrease spending but also adopt new corporate travel practices where a central role is played by technology which facilitates uninterrupted communication at a lower cost. One of the markets, which has seen a very strong growth of this category in 2015, was Iran, facilitated by the decreasing sanctions.
The lucrative business tourism is an attractive market niche and seen by many as the ‘cash cow’ of the trade which is why many destinations aim to carve a profit out of it. In terms of number of trips for business purpose, the top three markets in the Middle East by 2020 are expected to remain destinations such as the United Arab Emirates, Saudi Arabia and Qatar. The latter has leveraged business as the main pillar of its tourism industry supported by a strong economy and a wealthy public sector which in turn is proving a very profitable tourism stream.
Business tourism will record fairly strong growth for the period 2015-2020 in United Arab Emirates registering 7% in terms of number of trips facilitated by rising economic freedom levels in the country and improved efficiency of business regulations. Indeed a high ranking in the Index of economic freedom is closely linked to a healthy economy and high competitiveness.
Inbound business receipts on the other hand are expected to reach the USD6 billion mark by 2020. Infrastructure developments are expected to further boost the country’s business appeal. The United Arab Emirates plans to invest AED16.6 billion in infrastructure in 2016 in areas such as the Route 2020 Metro Extension in preparation for the World Expo 2020. The destination is also famed for its state-of-the-art facilities developed following extensive investment in hotel pipelines and airport capabilities. Business tourism is also supported by such city hubs as Dubai, the largest tourism destination in the MENA region boasting the most advanced transport infrastructure and passenger capacity at airports. Improved bilateral agreements and trade with such markets as China, further contributes for the exposure of the business proposition of this market. For example, the United Arab Emirates has been simplifying the visa application processes for Chinese travellers which can help attract more outbound trips from China to the United Arab Emirates.
Lebanon and Bahrain are two other markets to register growth by 2020 in the segment. In Lebanon, this trend was mainly driven by the travel of non-governmental organisation representatives and humanitarian workers who are travelling out of Beirut to cover Syrian-related causes. Bahrain on the other hand is increasingly being chosen as a destination for conferences, with it attracting large numbers of business tourists. Indeed the market already hosts a number of leading conferences, including the World Islamic Banking Conference, and the International Institute for Strategic Studies Manama Dialogue. Bahrain is expected to cement its position as a transit hub and an attractive business tourism destination reaching over 870,000 business arrivals by 2020.
In January 2016, the UN lifted the economic sanctions on Iran, allowing it to increase its trade activities. Iran is working towards attracting foreign investment in its oil sector, as well as focusing on attracting FDI in non-oil sectors. Iran’s MICE tourism thus presents great potential. Investors in the fields such as aviation, travel, gas and oil, food, and many more are making a move towards Iran. France, Italy, China, India, Germany, the UK, US, and Russia are some of the countries interested in investing in Iran which is expected to further boost the MICE segment in the country. Business trips to the country are expected to reach one million by 2020, while inbound business receipts will record value sales of USD445 million for the same period.
Oman is one of the markets in the Middle East struggling to attract the sheer volume of business travel flows as some of its main rivals (e.g. United Arab Emirates) as the country lagged behind in terms of developing MICE tourism and the appropriate infrastructure. It is also very difficult for the Sultanate to compete with the likes of Dubai, Abu Dhabi and Qatar. In 2015, business tourism arrivals were rising faster than leisure tourism arrivals with growth of 5% and this came as the government pushed forward MICE tourism in Oman. This is also helping revenues increase at a faster pace with value sales for inbound business receipts expected to record 4% growth to reach USD471 million. The new Oman Convention and Exhibition Centre (OCEC) is opening its doors in 2016, and will drive faster growth. This may allow Oman to attract more business tourists as it is primarily a leisure tourism destination at the moment.
Technology at the forefront
Economic and political developments taking place across the region are reflected in the variations observed in business travel. The Middle East has a very competitive business tourism product and is an interesting region for foreign and regional tourists. That said, there is rising competition, notably from regions such as Asia Pacific which has offerings that are similar and to a certain extent even more developed. Major players in the Middle East will therefore need to increase their efforts to compete with the fast rise of competitors and adopt new market products.
Demand for visual communications for example among millennials is expected to impact business travel. A survey by Redshift Research points out that 84% of participants would favour “virtual meetings with video for one out of every four interactions at a minimum”. This could entail a shift in travel budgets from troubled markets, where business can replace travel with videoconferencing and spending can instead be focused on travel to emerging markets in Asia, where growth is more certain.