Increased domestic spending demonstrates resilience of UAE economy, says Network International

Wednesday 16 March 2016

Dubai - MENA Herald: According to a report on consumer spends for 2015 by Network International, the leading payment solutions provider in the MENA region, domestic spends have increased 13% over 2014, while overall card spends in the UAE grew by 9% over 2014.
The report, based on credit and debit card transactions in the UAE, found that spending by UAE-issued cards has remained by far the largest in value over the past two years and has remained steady between AED 9 billion and AED 10 billion per month.

David Mountain, Chief Commercial Officer, Network International, commented: “The UAE economy, driven by diversification into non-oil revenues, has borne resilience to current market dynamics, as indicated by our analysis of card-spending data over the past year. Our analysis indicates some strong trends that can be leveraged by retailers and merchants in the UAE to bolster marketing strategies.”

Network International’s full year 2015 consumer spending report indicates that domestic spenders were the highest spending group in the UAE last year with the United States, Saudi Arabia, Qatar and Kuwait also making it to the top spenders list. GCC spending increased by 15% last year while North American spends showed a 12% growth. Among the top 7 tourist spenders, Qatar displaced Russia to take the fourth spot overall in the UAE.

Macroeconomic trends affect spends

The appreciation of the dollar (and thus the dirham) had a negative effect on tourist spends from non-pegged currencies, with repercussions especially dominant in Asian and European spending. US spending however, being independent of the exchange rate fluctuations, grew by 13%. However, the average per purchase spend of US cardholders decreased in all sectors (except travel and duty free) as major hospitality and retail chains devised attractive deals/discounts to lure American customers to visit and spend in Dubai.

Similarly, the steep decline in oil prices along-with the devaluation of the Russian rouble saw Russian spends drop to nearly half as much when compared to 2014. Chinese card spends also declined by 13% in 2015 as compared to 2014. The one exception here is the United Kingdom where spends grew by 9% in 2015 vs. 2014 even though the British Pound (GBP) depreciated against the UAE Dirham (AED) in 2015.

France and Australia were displaced from their 9th and 10th ranking (respectively) in terms of highest spends by Nigeria and India in 2015 (vs. 2014). Australia’s heavy dependence on China for the consumption of its natural resources and depreciation of the Euro are one of the major factors which led to a decline in tourist spends of Australians by 12% and French by 14% in 2015.

The Big Arab Appetite

UAE residents showed the highest increase in spending in the F&B and hotel sectors. They spent 23% more in restaurants in 2015. Other GCC countries also contributed heavily to this industry with Qataris leading the way with a 50% increase in F&B spends, followed by an equally impressive 48% increase in spends by cards issued in Saudi Arabia. Lebanese cardholders remained the highest per purchase spender from 2014 in this category.

Staycations bolster hotel spends

Growth in 2015 spends in the hospitality sector was driven by UAE ‘staycationers’ (+10%) as well as visitors from Saudi Arabia (+ 12%) and the United Kingdom (+14%) which offset the flat spending by US cardholders and a strong decline in European visitors including Germans (7%), French (12%), Austrians (36%), and Russian tourists (35%).

Overall, hotels witnessed a 4% growth in spends in 2015 vs 2014, however the per purchase spend declined this year, indicating a lower Revenue per Available Room (RevPAR) of hotels in the UAE.

Domestic and GCC spends help stabilise clothing sector

While the clothing sector did not experience any growth in volumes in 2015, domestic spends increased by 4%, offsetting a 9% decline in international spends. The major growth in spends in the UAE’s clothing sector came from cardholders in Saudi Arabia (19%), Qatar (15%) and Egypt (30%), while spends from Nigeria almost quadrupled in 2015 vs. 2014.

Supermarket spends increase

Supermarkets spends are unsurprisingly dependent on domestic consumption, and grew 9% in 2015 as compared to 2014. However, there was a 4% decline in per purchase spend of the sector from AED 212 to AED 203.

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