Other BriefingsSouth Korea’s H2O Hospitality Establishes Regional HQ in Abu Dhabi
The establishment of H2O Hospitality’s regional headquarters in Abu Dhabi, in partnership with ADIO, signifies deepening economic ties between South Korea and the UAE, focusing on innovation and technology synergy within the tourism and hospitality sector.
By Giulia Interesse
South Korea’s H2O Hospitality (H2O), a pioneering digital firm specializing in accommodation and leisure, has established its regional headquarters in Abu Dhabi in partnership with the Abu Dhabi Investment Office (ADIO).
Source: Emirates News Agency (WAM)
This move highlights South Korean firms’ proactive approach to tapping into the burgeoning hospitality market of the MENA region. H2O has stated that its recent set up at the ADGM financial center is pivotal for its forthcoming global expansion phase.
South Korea, renowned for its consistent top rankings on the Bloomberg Innovation Index over the past decade, complements Abu Dhabi’s status as the leading smart city in the Middle East and North Africa (MENA) region according to the IMD Smart City Index for 2023.
Further, with a focus on fostering innovation and technology synergies, South Korea and the UAE have agreed to engage in high-level exchanges throughout the year. Cheong Inkyo, South Korean Minister of Trade, speaking on the sidelines of the 13th WTO Ministerial Conference in Abu Dhabi held in late February, noted that both countries can identify and deliver concrete cooperation projects in advanced industries, such as mobility and aerospace, digital transformation, and supply chains.
South Korea and the UAE clinched a total of 32 commercial Memorandums of Understanding (MoUs) amounting to US$6.1 billion, along with sovereign wealth fund Mubadala’s decision to invest US$30 billion during the Korean President’s state visit to the UAE last January.
Korean foreign direct investment in the UAE totaled US$2.2 billion up until the beginning of 2021. These investments were mostly concentrated in finance, insurance, mining, retail, real estate, and transportation, energy, and technology sectors.
Background: South Korea-UAE ties
Since the establishment of diplomatic ties between the Republic of Korea and the United Arab Emirates in 1980, cooperation between the two countries has flourished. In 2018, the bilateral relationship was elevated to a special strategic partnership. Presently, both nations are committed to fostering sustainable growth across various sectors, including politics, diplomacy, defense, economy, society, culture, and the defense industry.
The UAE, recognized as one of South Korea’s closest partners, hosts the largest Korean community in the MENA region. Notably, there has been a recent increase in the number of Korean temporary residents and travelers to the UAE following joint efforts to overcome the challenges posed by the COVID-19 pandemic.
In November 2023, the UAE and South Korea finalized negotiations on a comprehensive economic partnership agreement (CEPA). Within the framework of the UAE-Korea CEPA, the UAE commits to gradually phasing out 91.2 percent of its tariffs over ten years, while South Korea pledges to eliminate 92.8 percent of its tariffs.
Over the same period, the UAE will reduce tariffs on major exports to South Korea, such as primary crude oil, from 3 percent to 0 percent. Similarly, South Korea will progressively decrease tariffs on exports to the UAE, including refrigerators, washing machines, and automobiles, from 5 percent to 0 percent.
Beyond tariff reductions, both nations have agreed to advance a special strategic partnership in five key areas, namely:
- Healthcare;
- Energy and resources;
- Advanced industries;
- Smart farms; and
- Bioeconomy.
Additionally, the UAE has granted South Korea access to various service sectors, including (but not limited to):
- Medical services;
- Content creation;
- Online gaming; and
- Construction.
The two countries anticipate signing the agreement in the first half of 2024, following the completion of necessary domestic procedures and legal review.
This move also follows South Korea’s signing of a free trade agreement (FTA) with the Gulf Cooperation Council (GCC) in December 2023. The FTA will encompass trade in goods, services, government procurement, and cooperation among small and medium-sized enterprises (SMEs), as well as customs procedures, intellectual property, and other areas.
UAE’s push for tourism and hospitality
The tourism sector in the Middle East is anticipated to sustain its growth trajectory, with passenger numbers projected to fully rebound in 2024, totaling an estimated 400 million travelers. In the first quarter of 2023, hotels in the UAE alone amassed revenues exceeding AED 12.2 billion (US$3.21 billion), attracting over 7.2 million visitors to the country.
In October 2023, the Emirates Tourism Council unveiled significant developments aimed at boosting the hospitality sector’s competitiveness in the UAE. Among the highlights is the establishment of a private sector Hospitality Advisory Committee, tasked with enhancing the sector’s performance in line with international standards.
This move comes as UAE hotel establishments reported remarkable revenue growth, with earnings reaching AED 26 billion (US$7.07 billion) during the initial seven months of 2023, reflecting a notable 24 percent increase year-on-year.
The Council also emphasized the pivotal role of the UAE Tourism Strategy 2031 (hereinafter referred to as the Strategy) in fostering sustainable growth and fostering collaboration between governmental bodies and private enterprises. The Strategy specifically focuses on the promotion of a unified touristic identity, growth and diversification of specialized tourism products, targeting underrepresented guest groups, and aligning tourism product development with urban development objectives.
Recognizing the need for continuous review and alignment with changing market trends and global challenges, UAE tourist authorities are actively promoting the travel and tourism industry. They collaborate closely with the private sector to establish global partnerships and attract investors, fostering the industry’s growth and resilience.
This commitment to diversification is evident through initiatives such as the “World’s Coolest Winter” campaign, a federal tourism endeavor that utilizes various media platforms and social channels to showcase the country’s premier winter tourism destinations. This campaign highlights distinctive experiences, entertainment offerings, and thrilling adventures across all seven emirates, embodying the nation’s rich tourism diversity.
Following the success of previous editions, which showcased a diverse array of tourism attractions and natural wonders, the initiative significantly boosted domestic tourism, with hotel revenues surging to AED 1.8 billion (US$490 million). This marked a notable 20 percent increase compared to the preceding edition’s earnings of AED 1.5 billion (US$08.3 million), underlining the campaign’s pivotal role in bolstering the UAE’s tourism sector and enhancing its economic resilience.
Along with the “We the UAE 2031 Vision” these campaigns collectively aim to further elevate the tourism sector’s contribution to the UAE’s GDP to AED 450 billion (US$112.5 billion) by the next decade.
Abu Dhabi tourism industry
Abu Dhabi is known for its serene atmosphere, which contrasts with the vibrancy of Dubai. The capital city and largest emirate in the UAE is also emerging as a cultural hub in the region and is home to the Louvre Abu Dhabi and the upcoming Zayed National Museum.
In 2023, the emirate set an ambitious target of welcoming 24 million visitors, accompanied by a notable surge in hotel occupancy rates, and marking a significant increase from the approximately 18 million visitors received in 2022.
The bulk of international visitors hail from key markets such as:
- India;
- Saudi Arabia;
- the UK, and
- the US.
According to the Department of Culture and Tourism – Abu Dhabi, the improved performance in both domestic and international markets can be attributed to heightened destination awareness and appreciation of Abu Dhabi’s diverse array of year-round entertainment, sporting events, trade shows, and promotional efforts.
Indeed, Abu Dhabi has begun to reap the benefits of a revamped tourism strategy, positioning itself as a premier destination for global business conferences and exhibitions. The Formula 1 week, for instance, remains a major attraction, particularly for its post-race concerts and festivities.
Abu Dhabi’s tourism and hospitality sectors continue to thrive with the inclusion of renowned global acts as part of its meticulously curated strategy. This commitment is further complemented by a flourishing MICE (Meetings, Incentives, Conferences, and Exhibitions) industry, bolstered by world-class venues, hotels, and supporting infrastructure.
The emirate is experiencing an unprecedented surge in hotel development, with esteemed brands like Ennismore, Nobu, Nammos, and Hilton entering the market to offer unmatched luxury experiences. The cityscape evolves as iconic properties and exclusive resorts redefine the standards of opulence and sophistication.
Moreover, in a strategic move to invigorate the economy and further boost the tourism sector, the Abu Dhabi government is implementing measures aimed at reducing tourism and municipality fees imposed on hotels. These initiatives signal a concerted effort to foster growth and enhance Abu Dhabi’s appeal as a premier travel destination.
How will H2O impact Abu Dhabi’s hospitality sector?
Looking ahead, the future of ties in the South Korea-Abu Dhabi hospitality sector holds promising opportunities, notably with H2O establishing its new headquarters in the Abu Dhabi Global Market.
John Lee, founder and CEO of H2O, emphasized the crucial role of digital transformation in the hospitality sector, highlighting the company’s dedication to adapting its technologies to meet the evolving needs of Abu Dhabi’s discerning customers. With support from ADIO, H2O’s expansion in the region aims to bring about significant changes in Abu Dhabi’s tourism landscape.
By introducing innovative solutions designed to streamline hotel operations and improve efficiency, H2O seeks to contribute to the projected 7.1 percent increase in hotel rates in 2024. With connections to over 85 online travel agencies and a diverse portfolio comprising more than 190,000 units and 680 properties, H2O is positioned to make meaningful contributions to Abu Dhabi’s hospitality sector. This aligns well with Abu Dhabi’s vision for sustainable growth and development in tourism.
As Abu Dhabi gradually emerges as a prominent luxury destination in the region, H2O’s presence and innovative offerings reflect the ongoing evolution of the UAE’s tourism sector. Their initiatives underscore the authentic experiences and genuine hospitality that continue to define Abu Dhabi’s journey as a global tourism destination.
