Marketing Assignment Sample : Direct Investment in the Tourism Industry in UAE
This report focuses on direct investment in the tourism industry in the UAE. Different strategies used for tourism development are identified and discussed. The impact of the international investors and tourists on the tourism industry is analyzed. Local visitors also enhance the tourism industry in the UAE. Hence, the international and national scenario of the tourism industry is discussed and its impact on the tourism economy and the GDP of the UAE is analyzed. There are several modes for investors to enter the tourism industry of the UAE. The appropriate entry mode for investors is also discussed. Every country has own institutional and cultural differences. The culture and tradition of Dubai are entirely different from other western countries. Hence, it is also important to mention the institutional and cultural differences faced by international tourists. The investment in the tourism industry has several opportunities and challenges which should be overcome for better tourist’s experience and overall growth of the UAE.
Table of Contents
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The travel industry is the developing business sector in UAE. The interest in the travel industry divisions has expanded and gotten colossal advantages terms of universal capital streams, world exchange, private ventures, framework improvement, and so on. The significant targets of the immediate interest in the travel industry in UAE are to accomplish manageable development and solidness in the financial conditions. The travel industry part in UAE has assumed a significant job in the basic change in terms of commitment to the non-oil monetary development of the UAE. The movement and the travel industry has upgraded the UAE economy as far as acquiring non-oil incomes as a rate portion of the UAE’s GDP (Khan, 2014). UAE is viewed as one of the biggest and most grounded the travel industry segment in which Dubai holds a 66% offer, Abu Dhabi holds a 16% share and Sharjah holds a 10% share of the UAE tourism economy. Various economic countries and domestic firms have decided to heavily invest in the tourism sector for the enhancement of the infrastructural development and tourism economy.
Strategies in Tourism Development
The UAE government has indicated an extraordinary vital standpoint and unmistakable fascination for the extension of the travel industry division (Saeid, Arifin and Hasim, 2012). The beneath referenced systems are started by the UAE government to improve the movement and the travel industry segment:
- Dubai Tourism Strategy (2020): This is a key guide which was propelled in 2013 with the principle goal of pulling in countless guests by 2020. The fundamental focal point of this technique is to concentrate on making Dubai as the ‘Principal Choice’ for the universal relaxation and business explorer. The technique offers a few occasions, attractions, frameworks, administrations and bundles to pull in and bid countless spectators. This procedure includes keeping up a piece of the overall industry in existing source markets, expanding a piece of the pie in business sectors with high development potential and expanding the number of rehash visits.
- Sharjah Tourism Vision (2021): This vision plans to pull above 10 million travelers before the year’s over 2021. Sharjah Commerce and Tourism Development Authority needs to make solid joint efforts with the accomplices in the travel industry segment for the achievement of the Sharjah Tourism Vision. The vision further incorporates four vital columns.
- Promoting Sharjah as a perfect family the travel industry goal by offering unmistakable bundles and offers uncommonly intended for families,
- Adopting an inventive travel industry way to deal with improve the vacationer experience through the arrangement of creative arrangements,
iii. Enhancing efficiencies in the travel industry area through association and shared activity to give world-class the travel industry offices and capacities, and
- Promoting the social and legacy components among families to assemble Sharjah as a universal social center point.
- Ajman Strategic Plan for Tourism (2015-2021): This system was started for the improvement and manageability of the travel industry segment. Compelling key organization and consistent advancement are required to pull in the visitor of different kinds. The Ajman Strategy centers around improving client experience and offering some benefit included administrations, upgrading maintainability and development, operational adequacy, enabled workforce in an innovative workplace and normal consumptions and ideal venture of monetary assets (Zarim et al., 2017).
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The international visitors enhance the tourism sector of the UAE and contribute to the total GDP of the UAE. The tourists are directly investing in the tourism sector of the UAE. The investment of the tourists will enhance the tourism sector and improve the infrastructural development to provide better tourism experience to international tourists. The total investment of the tourist in the tourism sector, directly and indirectly, contributes to the GDP of the UAE.
The above figure presents that the tourism sector of the UAE contributes more to the increase in the GDP. The tourism spending in the tourism sector contributes a significant share to the GDP. The Department of Culture and Tourism revealed huge growth in the tourism economy and the GDP of UAE in the upcoming years. The investment of the total number of tourists visited the UAE helps in rapid economic growth and sustainable development. The investment in the tourism sector also enhances other sectors such as construction, trade, and transportation as the development of all the sectors are inter-related (Falk, 2016). It strengthens the investment in the development and infrastructural projects.
The above figure presents the number of tourists visited the UAE from different countries. It has been reported that domestic tourists are vacationing locally taking the advantage of new attractions of the UAE. China, India and the United Kingdom are the top-three feeder market. The increase in international tourists strengthens the position of international travel destinations. Furthermore, the new visa regulations have boosted the number of international tourists in the UAE. An increasing number of venues such as airports, tourist spots, and hotels have earned the comfort and trust of the international tourists.
The national scenario of the investment in the tourism sector enhances the share of GDP, employment and the growth forecast of the UAE.
The travel and tourism industry generated a total contribution of $43 billion in the GDP of the UAE. The travel & tourism sector has a larger GDP impact than that of chemical manufacturing, automobile manufacturing, and agriculture sector.
According to the figure over, the immediate, circuitous and actuated effect on movement and the travel industry produces 12.1% of the UAE’s GDP. The effect of the immediate GDP of movement and the travel industry area is more than multiple times the size of the farming business in the UAE. The size of the horticulture division impacts the GDP by 1.6%.
The movement and the travel industry division have continued a sum of 0.6 million immediate, roundabout and instigated employments in the UAE. Except for the retail and the development areas, UAE straightforwardly utilizes more representatives in the movement and the travel industry segment.
As per the above figure, it can be analyzed that the tourism sector has played an important role in the employment of the people. The tourism sector supports and provides more employment than other sectors such as mining, banking, agriculture, etc. UAE generates 10.4% of employment through the travel and tourism sector. The employment in the tourism sector has made its linkages stronger than the retail store by creating indirect employment for every direct job (Stephenson and Ali-Knight, 2010).
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The GDP of the travel and tourism sector has increased by 240.9% from 1997 to 2017 and the total economy increased by 115.7% in UAE.
The above figure reports the gauge of the development of GDP in the movement and the travel industry area in the UAE. The GDP of the movement and the travel industry area is required to increment by 5.1% throughout the following decade. Breaking down the gauge development of each area, the all-out monetary development is required to increment by 4.6% per annum.
Appropriate Entry Mode
As the travel industry has become a significant segment for the monetary advancement of UAE, the speculation of the travel industry must be raised and the financial specialists must be pulled in. The standard section mode choices for the speculators in the travel industry incorporates vacationer’s spending, permitting, diversifying, joint endeavors, LLC and entirely possessed backups (Baena, 2013). The passage mode is viewed as institutional game plans that permit the company’s items and administrations going into outside business sectors by abusing their points of interest. The choice of the proper section mode is one of the pivotal issues in the travel industry. The diverse section modes are influenced by different factors as it contrasts in the degree of duty to the market, the degree of control offered and the venture required.
For a travel industry in UAE, there are two significant levels of control in the section mode for example high control mode and low control mode. The high control section mode requires high assets responsibility and is related to more hazard and vulnerability though; low control mode requires low assets pledge to decrease the hazard and vulnerability. The travel industry is considered as the delicate help industry which requires a high level of market responsibility, for example, authorizing and outside direct ventures (FDI). The significant passage modes for the travel industry are voyagers spending, authorizing, diversifying, joint endeavors, and so forth. The distinctive passage methods of the travel industry in UAE are clarified beneath:
- Tourists Spending: The travel industry is improved by the visitors visited in the UAE consistently. The expansion in the number of visitors builds the estimation of the travel industry. The vacationer spending on their outing is additionally considered as speculation. The traveler spends are gathered and utilized for the improvement and development of the travel industry in the UAE. The spending can likewise be used to upgrade the fundamental framework in the UAE for the comfort of the voyagers.
- Licensing: It is a moderately modern course of action where a firm moves the right to utilize the item or administration to another. It is very helpful when the permit has a generally enormous piece of the pie. The authorizing understanding will incorporate trademarks, copyright, and licenses (Kleiner and Krueger, 2010). The brand responsibility for and rumored inns has restricted nonexclusive characteristics and gives a self-showcasing advantage.
- Franchising: It is a promoting focused strategy for selling business administrations which is regularly to little free financial specialists with working capital yet have restricted or no business experience. Diversifying has empowered a few travel industry firms to build up an enormous brand far and wide. This is, for the most part, embraced by the lodging organizations in the travel industry. In the travel industry, the current inn business can change itself into a business point or a parent organization as opposed to being a free business substance (Alon, Ni, and Wang, 2012).
- Joint Ventures: It is a business venture embraced together by at least two gatherings that generally hold their particular characters (Harrigan, 2017). Outside the travel industry enterprises can build-up entirely remote claimed offices in UAE or joint adventure neighborhood UAE accomplices. Here, the travel industry organizations or organizations consent to cooperate and make a third organization to embrace this. Dangers and benefits in joint endeavors are shared similarly.
Institutional and Cultural Differences
The institutional differences in the UAE include the introduction of Value Added Tax (VAT), governments fighting inflation, Government’s expansionary fiscal policy, UAE’s monetary policy, regional economic and geopolitical uncertainty. The UAE Government should continue removing obstacles by improving collaboration and trade to continue its development and innovation in the tourism sector for the value-added services to international tourists (Nyarko, 2010). The institutional differences in the tourism industry are explained below:
- Rule of law: The legal executive of the UAE isn’t free and court decisions are liable to audit by the political administration. In any case, the standard of law is commonly all around kept up and the UAE is viewed as one of the district’s less degenerate nations.
- Government size: The UAE has no personal duty and no government level of corporate expense. Diverse corporate charge rates and another worth included expense has been presented. The general tax rate rises to an enormous measure of all-out local pay.
- Regulatory efficiency: Wide based financial extensions have been supported by before endeavors to fortify the business atmosphere and encourage the development of a progressively different private segment (Sidani and Al Ariss, 2014). Business guidelines are moderately adaptable and the no compensation cost of utilizing a laborer isn’t high.
- Open markets: The consolidated estimation of the imports and fares is equivalent to a colossal level of the GDP of the UAE. Speculation endeavors have concentrated on advancing private support in the travel industry area. The advancement distinguished in the travel industry is very moderate.
The language, culture, customs, traditions, and etiquette of every country are different. The UAE is trying to enhance the tourism sector by preserving and promoting the cultural and historical heritage of the emirates (Stephenson, 2014). Furthermore, cultural events, exhibitions, and museums are presented to international tourists to share the unique legacy of the UAE. The UAE is a democratic country and adheres to Muslim and Sharia laws. The various cultural differences are explained below:
- Clothing: Neighborhood individuals regularly wear a customary hijab or abaya, particularly in the mosques. In some historic places, western clothes are considered to be illegal. In public places, it is mandatory to wear pants that are longer and covers the knees and it is also important to notice that the shoulders are covered. Furthermore, revealing swimwear is forbidden and considered highly disrespectful.
- Mosques: There are incalculable of all shapes and sizes mosques in the UAE. The supplications are communicated and can be heard in all pieces of the city. Besides, a non-muslim isn’t permitted to enter in the mosques during the supplication time and Fridays.
- Arabic food: Arabic cooking is known for the utilization of dried organic products, vegetables and various assortments of flavors. UAE likewise has an assortment of cooking from everywhere throughout the world. The most celebrated cooking recognized in Arab culture is shoarma. Shoarma is made of chicken or sheep and served on the pita roll. Different popular foods distinguished are Taboulleh and Humus obviously (Pirani and Arafat, 2016). Cakes made with bunches of nuts are celebrated for the pastry.
- Culture and traditions: Numerous commonplace things are connected to the Arabic culture, for example, henna tattoos, paunch artists, eating on the pad on the ground, assortments of lights and camels. To encounter a superior Arabic culture and custom, a desert safari is the best vacation spot (Picton, 2010).
Opportunities and Challenges
The opportunities for investment in tourism industries in the UAE are as follows:
- Increase in employment opportunities: The tourism industry in UAE is highly in demand which has increased employment opportunities for the local people. The international visitors require tourist guide, travel agencies, site seeing companies, etc. which increases the job opportunities in UAE. The demand for Arabic food has also increased the number of food stalls and restaurants recently.
- Increase indirect investment in the tourism sector: The major direct investment that is identified is tourist spending. When international tourists visit the place, they spend on different entertainment and attractions of the UAE. Other big investors are hugely investing in licensing and franchising the large and reputed brand names which help in enhancing the tourists’ experience (Stephenson and Al-Hamarneh, 2017).
- Infrastructural development of UAE: The basic infrastructure such as airports, roads, hotels, etc. attracts tourists. Better infrastructural development leads to better tourist’s experience. The investment in the tourism industry can also be used to improve and develop the infrastructure of the UAE.
- The economic growth of UAE: The improvement and advancement of the foundation and increment in several travelers in the UAE will expand the travel industry economy of the nation (Khan, 2014). The travel industry economy assumes a significant job in the general financial development of the UAE. The expansion in the travel industry economy will bring about the monetary development of the UAE.
- Increase in the GDP of the UAE: The increase in direct investment in the tourism industry and the economic growth of the UAE will eventually increase the GDP of the country. The increment of the GDP of the UAE will motivate the government to implement some beneficial policies to enhance the tourism industry.
The challenges of investment in tourism industries in the UAE are as follows:
- High competition from other countries: The competition is extremely high for the tourism industry as every country has its attraction for international tourists. The demand for other countries in the tourism industry is equally high. Turkey, London, Bali, Thailand, Maldives, etc. are the countries with high tourists’ demand. UAE must maintain and improve the cultural attractions to increase the tourism industry (Ali, Arifin and Hasi, 2012). The cultural heritage and the historical tradition of the UAE must be protected to enhance the tourist’s experience.
- Lack of policies and mechanisms: The government of the UAE has no growth and improvement policies and mechanism for the tourism industry. Without any innovation and the new adventures and attractions, the tourists will not desire to travel UAE. So, appropriate policies and mechanisms must be developed to improve the overall tourism industry.
- Lack of tourism promotion: The UAE government does not promote tourism properly. For better tourists’ attractions, tourism advertising and promotion must be properly done.
Following recommendations must be considered to increase the investment in the tourism industry in UAE:
- Strong collaboration with the tourism partners
- Cultural and historical heritage must be promoted
- Strict policies must be initiated to overcome the obstacles
- Infrastructure such as airports, hotels, etc. must be developed
- Tourists’ satisfaction must be given higher preferences.
To summarize the above dialog, it tends to be inferred that the travel industry assumes an indispensable job in the improvement of the UAE GDP and monetary development. The interest in the travel industry can give a few worldwide and national advantages. The proper passage method of speculation must be chosen for the improvement of the travel industry. The UAE faces a few institutional and social contrasts in the immediate interest in the travel industry area. Besides, a few chances and difficulties are examined for the interest in the travel industry division. Subsequently, some significant focuses are prescribed to defeat the difficulties and increment the interest in the travel industry to improve the general development of the UAE.