The sight of Dubai’s Fairmont The Palm hotel ablaze this weekend following an Iranian missile strike was a stark reminder that hospitality remains resilient to geopolitical factors only to a certain point.
In recent months, hospitality analysts studying travel behaviours largely concluded that certain consumers – particularly luxury ones – keep on travelling despite news of political stand-offs and brewing conflicts. “High-end travellers are a bit more immune to geopolitical uncertainty,” Alpha Bank general manager wholesale banking Yannis Emiris told delegates at the R&R Hospitality Forum in Greece. The idea, he said, was that luxury hospitality could remain a “hedge towards international uncertainty”.
However, the weekend’s attacks on Tehran – and the regime’s retaliatory strikes across the Gulf region, and as far west as Cyprus – bring the threat into sharp focus. Shuttered airports from Dubai to Qatar, plus stranded planes and crew, have blocked thousands of tourists and business travellers. As of March 2, partial airspace closures have been announced in Bahrain, Iran, Iraq, Israel, Jordan, Kuwait, Qatar, Saudi Arabia, Syria and the United Arab Emirates (UAE).
Reflecting the new, physical challenges, several hospitality stocks fell as of the start of the week, not least due to the considerable exposure of global hotel groups to the Middle East. Many hotel companies have been betting on expansion in the Gulf region in recent years, attracted by wealthy consumers and growing occupancy metrics. Just days ago, CoStar released an upbeat prediction that RevPAR in Abu Dhabi, Dubai, Jeddah and Riyadh would rise an average of 4.2 percent in 2026, a substantial upgrade on the 1.5 percent increase forecasted in November. Weeks or months of strikes place this in doubt. Furthermore, predictions of revenue rises are connected to the limited development pipeline in all four markets; conflict in the region puts further pressure on construction plans, potentially delaying available room growth.
Reprisal risks affect the wider region. “Iranian retaliation is likely to weigh on Israel’s economy,” says William Jackson, chief emerging markets economist at Capital Economics. “The 12-day war with Iran in June last year resulted in a fall in GDP of 1.1 percent quarter-on-quarter in Q2. Elsewhere in the Middle East, there may be disruptions to activity arising from the threat of an Iranian attack on US military bases in the region and from airspace closures,” he notes.
Middle East dynamics
Hospitality dynamics have been rapidly evolving in UAE, with exceptional growth in Abu Dhabi, for example, set to align the market with Dubai’s room rates as of next year, according to CoStar predictions. However, the sheer size of Dubai – with 165,339 existing and upcoming keys, according to Knight Frank – sharpens fears around its role in the Iran conflict. Continuing missile and drone strikes could not only damage the city, but also its reputation as a friendly tax haven and holiday destination, neutral to sectarian risks.
Conflict also impacts consumer views of the Middle East’s branded residential market, an area in dramatic expansion. As the most active city globally for branded residences, Dubai is projected to account for 40 percent of all development in the region by 2031, according to Savills data. However, it is Egypt and Saudi Arabia that exhibit the most impressive pipeline with the two countries demonstrating between 800 percent and 1,500 percent growth over the forecast period, which is largely attributed to their ambitious 2030 development plans and visions. With branded residential buyers targeting secure locations representing a “carefree” package that includes access and security factors, local risks can also weigh heavy on a location’s overall appeal.
European fallout
While largely billed as a Middle Eastern crisis, conflict in Iran has a global dimension that threatens to impact Europe, too. Part of this is the macroeconomic aspect, with rising oil prices expected to translate into domestic inflationary pressures, which matter for investor costs. But a drone attack on Monday on a UK military base in Cyprus also physically looped the continent into the war. With EasyJet among airlines cancelling flights to the island, government officials report an “ongoing security threat”.
To understand the potential impact on European travel volumes, it is perhaps worth considering how war in Ukraine impacted tourism flows to the wider continent. Research from the Oeconomus Economic Research Foundation found that the net sentiment score (NSS), measuring the perception of European destinations, dropped by -15 points compared to destinations on other continents in March 2022. Estonia, Poland and Lithuania were considered the most dangerous neighbouring countries by tourists in the first year of the Ukraine war. At the time, Greece received the highest positive rating with +21 points, reflecting its overall appeal and geographical distance from Ukraine.
Attack risks in Cyprus conversely elevate perceived threats to areas of Southern Europe, including Greece and Turkey. Again, this may mean that other European markets, further away from the island, benefit. But risk perceptions matter. New research from the European Travel Commission reveals that safety has become the leading criterion for global tourists when selecting a European destination, cited by 51 percent of respondents, a significant rise year-on-year. According to the research, published in February, Europe ranks highest globally across all safety dimensions, including political stability, personal safety and natural hazards. This perception is particularly strong among Chinese travellers, reinforcing Europe’s position as a reliable and secure destination in an uncertain global environment. For Europe, maintaining that reputation is crucial.
Trump perceptions
Finally, US inbound and outbound travel dynamics are worth considering. Global perceptions around president Trump’s administration already affected tourism flows to the US last year. According to a 2025 report by the World Travel & Tourism Council, the United States lost an estimated $12.5 billion in international traveller spending last year, representing a 6.6 percent decrease compared to 2024. Factors included the administration’s handling of immigration and tighter visa requirements; this year, potential tourists will also take into consideration how well the US treats visitors to the FIFA World Cup over the summer.
US outbound tourism, meanwhile, should still support Europe’s hospitality industry this year, but the continent will also look to other long-haul markets to grow volumes. Asian markets including Japan, China and India are particular bright spots for inbound travel, and should Europe evade being drawn further into the conflict, the continent will be leaning on its “safe haven” status for success.