Question
What economic factors should be considered for a PESTLE analysis of the hospitality industry in the UAE?
Answer
When conducting a PESTLE analysis of the hospitality industry in the UAE, several economic factors should be considered. These factors are crucial for understanding the industry’s dynamics and potential challenges.
Key Economic Factors
Financial Sustainability and Economic Distress: The financial strength of businesses, particularly SMEs, is a critical factor. During economic downturns, such as those caused by COVID-19, financial sustainability influences the ability of firms to adopt innovative strategies and technology, which are essential for survival and growth (Shwedeh et al., 2022).
Contribution to GDP: The hospitality and tourism sector, including the MICE (Meetings, Incentives, Conferences, and Exhibitions) industry, significantly contributes to the UAE’s GDP. Understanding its economic impact helps in assessing the sector’s importance and the potential effects of economic fluctuations (Aburumman, 2020).
Demand Fluctuations: The demand for hospitality services, especially in the MICE sector, can be highly volatile due to external factors like travel restrictions. This volatility affects revenue streams and requires strategic planning to mitigate risks (Aburumman, 2020).
Cost of Capital and Investment: The cost of capital is a significant economic factor, influencing the ability of businesses to invest in long-term projects and innovations. High capital costs can hinder growth and competitiveness in the hospitality industry (Agyekum et al., 2021).
Economic Diversification: The UAE’s efforts to diversify its economy beyond oil have positioned tourism as a key sector. This diversification strategy impacts investment priorities and resource allocation within the hospitality industry (Aburumman, 2020).
In summary, the economic factors crucial for a PESTLE analysis of the UAE’s hospitality industry include financial sustainability, the sector’s contribution to GDP, demand fluctuations, cost of capital, and economic diversification efforts. These factors collectively shape the industry’s landscape and influence strategic decision-making.
References
Shwedeh, F., Aburayya, A., Alfaisal, R., Adelaja, A., Ogbolu, G., Aldhuhoori, A., & Salloum, S., 2022. SMEs’ Innovativeness and Technology Adoption as Downsizing Strategies during COVID-19: The Moderating Role of Financial Sustainability in the Tourism Industry Using Structural Equation Modelling. Sustainability. https://doi.org/10.3390/su142316044
Aburumman, A., 2020. COVID-19 impact and survival strategy in business tourism market: the example of the UAE MICE industry. Humanities and Social Sciences Communications, 7, pp. 1-11. https://doi.org/10.1057/s41599-020-00630-8
Agyekum, E., Amjad, F., Mohsin, M., & Ansah, M., 2021. A bird’s eye view of Ghana’s renewable energy sector environment: A Multi-Criteria Decision-Making approach. Utilities Policy, 70, pp. 101219. https://doi.org/10.1016/J.JUP.2021.101219
Trading Economics (2016a). United Arab Emirates Foreign Direct Investment. [online] Available at: [Accessed 25/07/16]
Trading Economics (2016b). United Arab Emirates Unemployment Rate. [online] Available at: [Accessed 25/07/16]
