The world’s dominant travel hub by 2025


Amadeus introduced its version why the Middle East is on it’s way to become
the world’s dominant travel hub.

Amadeus report reads:
The recent past has been a rollercoaster ride for business in general
and the aviation industry in particular. The recession has affected
virtually every sector, both locally and globally, and the airline sector
has been left reeling by crises such as volcanic ash, the swine flu
outbreak and terrorist threats. These difficulties have revealed how
vulnerable the travel industry is to external factors, which we cannot
control, but which we can better anticipate in future. In this study
we focus on what we can control, looking at ways the Middle East
region can galvanise its position as a travel hub of the future. And in
the Middle East, the future looks positive.

The Gulf region has remained relatively stable in the midst of the global
turmoil of recent times, and has even seen growth across many
sectors, including aviation and tourism. Investment in infrastructure
developments such as new airport extensions (e.g. the planned
Midfield Terminal at Abu Dhabi International Airport) and Burj
Khalifa, the world’s tallest tower, along with a strategic geographical
location, continue to boost travel through the region. The IT industry
also remains strong and airlines and travel companies in the Middle
East have proven to be innovative in terms of technology adoption.
The Middle East is thus well placed to become the world’s premier
travel hub – although it is clear in this report that a number of
things remain to be done in order for this vision to become a reality.
We have commissioned this report to focus on what the Middle
East must do to fulfill its potential as a dominant global hub. In the
report we set out the steps needed to make this vision a reality. The
report reviews the current situation in the travel sector, addresses
the key economic and political developments and examines the role
of key players. We also explore the role of technology in supporting
the Middle East reach its potential and detail what further expertise
and infrastructure is required.

When developing this report, we interviewed several executives
and leaders in the aviation and travel industries, whose views are
collected in a special section offering reflections and insights on
the state of the market and its future. Those interviewed included
representatives from organisations such as the Arab Air Carriers
Organization (AACO), Marriott and the Abu Dhabi National
Corporation of Tourism and Hotels. We also conducted extensive
desk research to understand how demographic, political and
economic circumstances will shape the future of the travel sector in
the region and beyond.

We hope you find the report insightful and that it stimulates further
the discussion about how the region can succeed in its quest to
become the most dominant global travel hub.

In this report, we outline the factors that will influence the Middle
East’s success in reaching its goal of becoming the dominant global
travel hub. Certainly, in light of recent financial and economic
setbacks the aviation and tourism industries must work hard to
attract new business and leisure travellers to the region.
Over the past few years, largely driven by huge oil and gas revenues,
the Middle East has seen exponential growth in many industry sectors. In an attempt to diversify the region’s industry from petroleumderived incomes, national funds have been heavily invested in infrastructure projects such as commercial real estate (offices and hotels)
and public transportation, including airports and national airlines.
The boom in the aviation sector is poised to have a significant
influence on future global air traffic and the Middle East’s strategic
geographical location will enable the emerging national carriers
to connect most metropolises via a single hub. A global travel hub
would bring transformative effects to the region’s economy, allowing it to attract other industries and become more sustainable in the
long term.

Whilst many factors and trends suggest that the prize of this
position is there to be taken, there remain a number of significant
barriers that may hamper progress unless action is taken to address
them. History is littered with countries, businesses, sports teams
and politicians that fail to grasp the prize that was duly theirs.
This is the risk for the Middle East. However, if the region can
capitalise on its strengths it will succeed in its bid to become the
world’s dominant travel hub. The Middle East has already made
significant headway in its journey to become the world’s premier
travel hub. The signs are positive:

> Comparatively strong gross domestic product (GDP) growth,
especially when compared with the G7 countries (Canada, France,
Germany, Italy, Japan, U.K. and the U.S.). Despite the global
economic downturn, growth is expected to continue in the long

> Huge investments, especially in the oil and gas sector, which have
historically resulted in an increased demand for business travel
and in turn fuelled the aviation and construction industries. The
aviation sector and tourism has been massively promoted in
recent years.
> Government social and political goals focused on job creation,
which on one hand can help create the pool of skilled labour
needed to support the region’s international hub ambitions and
on the other can also lead to increased affluence and local and
regional air travel.

> Its strategic location as a huhub for passenger transit between
Europe and the major growth market of Asia Pacific.
> Major investment in the air travel industry (airlines, airports and
air control), including $86 billion USD earmarked for Middle East
airports in the coming years and predicted passenger and cargo
traffic growth of 8% annually until 2015

1 Growing international, intra-Middle East and domestic tourism,
with the number of tourists to the Middle East projected to
double to 136 million by 2020 versus 54 million in 2008
2 Advanced use of IT, due to rapid establishment and development
of new carriers in the past decade, who invest in new IT rather
than possessing legacy systems. This IT is deployed for the
efficient distribution of travel products and services, with airline
tickets, hotel bookings and many other components of the travel
and transport supply chain distributed via electronic channels
such as global distribution systems and the Internet.
> Increasing intra-Middle East traffic as a result of low-cost carriers
(LCCs) entering the market. In addition to tourism and business
travel, visiting friends and relatives (VFR) and religious travel have
gained significance and are expected to grow rapidly
Although the region benefits from these assets, this paper also
takes an objective look at the region’s future and notes a number
of factors which could hinder further growth and development

> Political and social instability in the Middle East region.
> Decline in growth in the global airline industry.
> Failure to improve the regulatory framework, covering issues such
as cross-border coordination of large projects, harmonised visa
regulations, measures to ease airspace congestion and lack of
transparency in the financial sector.

> Poor integration of Middle East carriers with global air alliances
such as Star Alliance and oneworld.

Clearly, the public and private sectors may be able to influence
some of these factors to a greater degree than others. The region is
fortunate, however, that its hydrocarbon exports should continue
to provide, for the medium term at least, sufficient funds to finance
whatever investments are needed to make the development of the
global hub a reality.

If political stability is maintained and travel demand to the region
can be expanded through international tourism, the Middle East
should be able to successfully steer a course to reach its target to
become the world’s dominant travel hub by 2025.

Nonetheless, in order to ensure continued growth, the aviation
and tourism industries must therefore work hard to attract new
business and leisure travellers to the region as well as capitalise on
transit passengers.

The prize, benefits of which are detailed in the following section,
requires focus and determination on behalf of the travel industry
and governments to both address the challenges and seize the
opportunities that emerge in the years ahead.

In general, there are significant opportunities for airlines (and travel
agents) which could arise from the weak points in the current value
chain, such as the disconnect between ground transportation
and the flight. Passenger willingness to pay for a smooth travel
experience seems to be a significant opportunity, with a variety of
sources of value but one which has so far gone largely unexploited.
New technologies offer the potential to access these sources of
value by allowing airlines and agents to more closely tailor their
products to match traveller preferences.