Gulf tourism faces short-term losses, but recovery will be quick

The Gulf’s tourism sector is expected to take a significant short-term hit as regional conflict disrupts air travel, weakens traveller confidence and forces widespread flight cancellations, but analysts say regional markets retain the financial strength and infrastructure needed for recovery once hostilities ease.

More than 5,000 flights were cancelled within the first 48 hours of the conflict, with large parts of regional airspace closed, immediately affecting one of the world’s fastest-growing travel corridors.

Research by Oxford Economics and Tourism Economics estimates inbound arrivals to the Middle East could decline by 11% to 27% in 2026, compared with earlier projections for 13% growth.

That would mean 23 million to 38 million fewer international visitors and a loss of $34 billion to $56 billion in visitor spending across the region this year.

Despite the disruption, Gulf tourism markets are entering the crisis from a position of strength. Dubai welcomed 19.59 million international overnight visitors in 2025, up 5% year-on-year, while hotel occupancy remained above 80% across more than 154,000 rooms.

Analysts say that reflects the depth of demand already built into the region’s tourism sector.

S&P Global has reaffirmed the credit strength of United Arab Emirates, citing strong reserves and policy flexibility as buffers against regional volatility.

Although UAE real GDP growth is now projected at around 2.5% in 2026 and 2027, down from an earlier forecast of 4.2%, economists describe the revision as a slowdown rather than a structural setback.

Government spending is expected to rise by more than 7% in 2026, signalling continued investment despite current disruption.

Tourism recovery will largely depend on how long the conflict lasts. Under a scenario where tensions ease within one to three weeks, Tourism Economics projects an 11% fall in arrivals and a $34 billion spending loss. If conflict extends to two months, losses could deepen to 27% and $56 billion.

Even so, analysts continue to view the downturn as temporary.

Gloria Guevara, President and Chief Executive of World Travel & Tourism Council, said previous security-related crises have shown tourism can recover in as little as two months when governments and industry act quickly to restore confidence.

The region’s past rebounds after the 2008 financial crisis, the Arab Spring and the COVID-19 pandemic continue to support that view.

Oxford Economics expects global economic impact to remain limited, with world GDP growth in 2026 only 0.1 percentage points lower than previously forecast.

For the Gulf, recovery momentum is already reflected in stronger projections for next year, with GCC growth forecast at 5.2% in 2027.

For the UAE, GDP growth is projected at 6.8% in 2027, above both pre-crisis expectations and the 5.5% recorded in 2025.

Analysts say that pattern confirms a familiar regional trend: conflict may interrupt tourism flows, but long-term investment in aviation, hospitality and destination infrastructure continues to support faster recovery once stability returns. - TradeArabia News Service