Slump in Russian tourists slows down Dubai luxury retail sector

Dubai: With fewer tourists visiting Dubai from Russia and Europe, retailers have witnessed a slowdown in sales, particularly in the luxury end of the market.

According to a report by Jones Lang LaSalle (JLL), Dubai’s retail sector did not post a stellar performance during the second quarter of the year, as the number of traveling luxury shoppers has declined.

“Retail sales continue to slow down, particularly in the luxury segment, as tourist spending from Russia has declined,” JLL said.

Dubai’s massive shopping malls, with their expansive collection of international retail brands, had been a regular magnet for cash-flush tourists, especially from Russia.

However, the recent decline in some currencies against the US dollar, coupled with the continued fall in the price of oil, means that travelers from certain markets are now finding it expensive to spend their money in the emirate.

The depreciation in purchasing power has ultimately forced many consumers to reduce spending and put expensive travel plans on hold, leading to a decline in Russian tourist traffic to Dubai.

Dubai is still getting some tourists from other markets and it now “sees a change in its visitor profile, with fewer tourists from Russia and Europe, and more from Asia and Africa,” according to JLL.

“Russian travelers to Dubai have significantly reduced due to their socio-economic situation,” Habib Khan, general manager at Arabian Courtyard Hotel and Spa, told Gulf News.

Despite the slowdown, Dubai’s retail sector will continue to expand, with some 194,000 square metres of gross leasable area, mostly shopping mall extensions, expected to be completed before the end of the year.

Aside from the luxury segment, another area of concern is the food and beverage market in Dubai. Given the number of new restaurants, cafes and other F&B outlets that have recently opened up, the market is facing “saturation” and  JLL said retailers have “come under pressure” to set themselves apart from the competition.

“The F&B market in Dubai has undergone significant expansion of the past couple of years, and is set to grow further in the near future as demand remains strong.”

“However, given the current levels of market saturation, retailers have come under pressure to differentiate their offerings in order to attract footfall and maintain their competitive edge.”

“While new operators entering the market may initially find it easy to set up their business, maintaining a niche product and accounting for high costs need to be taken into consideration as F&B operators are faced with strong competition, which will inevitably result in a high turnover ratio.”