Navigating a High-Stakes Geopolitical Landscape

• The Middle East’s hospitality industry grapples with the dual challenge of harnessing short-term gains and the uncertainty of sustained conflict. 
• While some regions see an increase in tourism demand, others experience a decline due to geopolitical tensions and security concerns.

Rising geopolitical instability in the Middle East is impacting the region’s hospitality industry. The ongoing Russia-Ukraine war and long-standing regional hostilities involving Iran and Israel have created a high-risk environment for tourism. According to Tareq Bagaeen, senior consultant for HOTSTATS, this has led to a mix of unusual demand and declining interest across key markets.

In Lebanon, hotels are experiencing high occupancy rates due to an influx of international journalists covering nearby conflicts. However, this increase is viewed as temporary. Extended violence and uncertainty could potentially drive tourists away. In contrast, Jordan and Egypt, popular tourist destinations, are already experiencing a decline in visitor numbers due to their proximity to conflict zones and disruptions in air travel.

Operationally, hotels in the Middle East are grappling with increased security expenses and higher insurance costs. To cope with this, many prioritize revenue generation while remaining vigilant of political developments that could lead to sudden downturns in demand.

Saudi Arabia and the UAE continue to dominate the region’s hospitality landscape, each with ambitious growth plans to enhance their appeal as travel destinations. Saudi Arabia, for instance, is leading large-scale tourism efforts through the Riyadh Season initiative. Conversely, the UAE is diversifying its tourism portfolio with high-profile projects such as a new casino in Ras Al Khaimah and a new airport in Dubai. Both nations, however, remain acutely aware of the surrounding volatility and the risk it poses to their growth strategies.

The Russia-Ukraine conflict has temporarily boosted the hospitality and real estate markets in the Gulf states, particularly the UAE and Turkey, due to an influx of Russian capital and expatriates. However, this trend may be short-lived if international conditions change or sanctions tighten.

Despite these challenges, the Middle East’s hospitality sector remains resilient, staying alert to global political shifts while maximizing present profits. The region prepares for growth and potential abrupt downturns as external and internal conflicts reshape the regional landscape. An explicit and informed perspective on these changes is essential for stakeholders investing in the region’s future.