In July, authorities in the United Arab Emirates made a headline-grabbing offer: If UAE residents could entice visitors there between July and October this year, the residents would qualify for a package of perks worth around $800. That was even though most foreign governments are still cautioning their citizens against travel to the UAE due to the Iran war. After Israel and the US began launching strikes at Iran at the end of February, Iran responded by attacking US allies in the region, including the UAE.
As a result, hotel occupancy in the emirate of Dubai plummeted, with rooms going from 80% full to only around 10% occupied. Since then, some UAE hotels have closed prematurely for planned renovations and other five-star resorts have enticed UAE residents for "staycations" in luxury accommodation with a 50% discount. Out of around 11.8 million people in the UAE, up to about 10.4 million are non-nationals.
These locals run the gamut from millionaires enjoying their tax-free status in the UAE to expats who work on building sites or as cleaners and send their wages to family back home. Many wealthier individuals with security concerns left when Iranian missiles began flying overhead. To ensure they return after the war, the UAE has said it will take a more flexible approach to rules around tax residency.
That is, individuals can be out of the country for longer and not worry about losing their UAE tax status. The New York Times has reported on the difficult situation that many of the lower-paid foreigners find themselves in as work in hospitality and tourism evaporates. Reporters in Dubai said they had seen individuals going door-to-door looking for work.
The UAE also put together a package worth around $680 million (€587 million) to help affected sectors — this included exempting hotels, restaurants and some private schools from municipality costs or delaying licensing fees. There have been many more worrying indicators, though. Analysts predict that foreign direct investment in the Gulf states will drop and gross domestic product fall for the first time since the COVID-19 pandemic.
"Although tensions have calmed, the latent risk of a regional conflict reigniting will underpin investor wariness for the remainder of the year," the Economist Intelligence Unit warned in a July 31 briefing. Employers said they were planning to cut jobs and didn't expect to make new hires, and inflationary pressure, due to things like the blockage of the Strait of Hormuz, meant raw materials and imports of all kinds were rising in price. UAE real estate prices also fell.
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