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29 March 2024

'Overcapacity may upset Mideast becoming a travel hub'

Published
By Staff

The Middle East has planned major investments in the travel industry, including $86 billion for airports, but problems may arise due to over investment in infrastructure and airline capacity, according to the findings of a study launched on Monday by Amadeus, a travel technology partner and transaction processor for the global travel and tourism industry.

Around $4 trillion has been announced in travel and tourism projects in the Middle East, and $86bn is earmarked for Middle East airport development and the figure will double after 2025. Dubai, Abu Dhabi and Qatar, all close to each other, continue to invest heavily in transport, real estate and tourism infrastructure, the report said.

However, current national airport expansion plans could lead to overcapacity, and the efficiency of having three large airports in the GCC is questioned.

Middle East carriers also continue to invest heavily in their fleets and routes and there is doubt this can be sustained without consolidation between the three GCC airlines," the study titled 'Securing the Prize for the Middle East ' finds.

Nevertheless, the study said the number of tourists travelling to the Middle East is projected to double to 136 million by 2020 compared with 54 million in 2008 and the region is poised to become a global travel hub by 2025.

A new set of socio-economic and geo-political factors are enabling the region to eclipse traditional travel centres in Europe, the US and Asia. These include the region's geographic position at the centre of the major air  routes, its continued economic growth compared with the G8 countries, and the major investments planned in the travel industry, including $86bn for airports.

Further, two billion people are within 2.5 hours reach by air from the Middle East and by 2025, seven billion people will be within reach via a single flight. The study said new intra-regional travel within the Middle East is opening up further growth opportunities.

Religious travel is a major factor, with three million pilgrims visiting Mecca each year and 2 million visiting Umrah. The opportunity also exists to reach out to countries with high Muslim populations outside of  the Middle East (for example Indonesia, home to 200 million Muslims, or Nigeria, home to 74 million Muslims).

Religious tourism is likely to be a major new factor with Saudi Arabia generating more than $7bn in 2009 from visitors to Muslim pilgrimage sites and projecting visitor numbers to grow from over 12 million in 2009 to 15 million in 2013. The emergence of a new range of low cost carriers will also support this trend, the study said.

Commissioned by Amadeus, the study was developed by Insights Management Consultancy, and h2c, a hospitality marketing and distribution solutions consultancy.

The study nevertheless, pointed out the various factors that could stop the Middle East becoming a travel hub.

One of them is complacency that could prevent the Middle East from achieving its ambitions.

"The Middle East already connects more major global destinations via a single flight than any other hub. The aim of becoming the world's dominant travel hub by 2025 is within reach, but obstacles remain, the chief one being complacency," Antoine Medawar, Vice President, Middle East and North Africa, Amadeus, said.

Regulatory complexity is another issue that needs attention, the study finds. A range of regulatory inefficiencies exists in the Middle East's operation as a global travel hub - for example, multiple aviation authorities serving a small geographic region, the study said. Airlines, airports and aviation authorities need to work together as visas, security and air control can differ from country to country. An idea suggested in the report is the creation of a United Arabian Sky policy, similar to the Open Skies initiative between the US and Europe.

Further, there is the need for the Middle East to operate with a high level of business transparency particularly with regards to the new investments that are expected as growth continues, and deregulation and privatisation progresses, the study said.

Accusations from competing airlines that the UAE carriers receive hidden state subsidies are damaging and untrue. It is necessary to demonstrate there is a split between regulation, funding and ownership of airlines and airport infrastructure, it noted.

Mideast airlines also need to form alliances, the study recommends.

The major Middle East carriers - emirates, Etihad and Qatar Airways - currently have an independent stance towards global alliances. However the development of alliances is a key part of the aim to become the world's dominant hub.

In addition to linking up with existing global alliances there is also the benefit of greater connections between airlines in the Middle East, the study noted.