Businesses worldwide are bracing themselves for shifting consumer behaviours and seasonal market trends, which are heating up at a crucial time of year: summer.
Understanding the impact of summer is vital for a range of industries and sectors, not least in the Middle East and North Africa (MENA) region and the countries in the Gulf Cooperation Council (GCC). Al Majalla looks at the trends at play and what they can teach the world about dealing with extreme heat. But first, we take a look at the global summer economy.
Before we get into the positive trends, it's important to mention that some sectors actually slow down in the summer. The financial sector often sees reduced activity, not least due to staff vacations. JP Morgan highlights that stock market trading volumes drop during summer, often leading to increased market volatility.
Meanwhile, analysts warn that a stock market sell-off looks possible this summer, with a strong rally over the year-to-date leaving valuations looking vulnerable. The bank said in a recent note that the main US share index, the S&P 500, could test the 5,000-point level, with declines of as much as 10% taking it to as low as 4,800.
Tourism, retail and F&B
Tourism, retail, and food and beverage sectors see an uptick in the summer, especially after pent-up demand seen after COVID restrictions were lifted. According to a recently published UN World Tourism Organisation (UNWTO) report, international tourist arrivals in 2023 reached 88% of pre-COVID levels after travel restrictions were lifted.
A survey from Deloitte highlighted the trends, including signs that elevated levels of post-Covid travel demand are easing: “Each income group plans to spend 6% to 13% more than in 2023. Due to the growth in high-income influence, overall summer budgets are up 18% ... the average traveller plans 2.3 trips this summer, bringing frequency back down to 2022 levels after it rose to 3.1 in 2023.”
There is also a surge in demand for seasonal products such as air conditioners, beverages, and clothing. Marketing becomes essential for capturing this spending. Additionally, companies often launch summer-themed promotions to attract customers.
Product launches are also timed to coincide with the season. Technology companies often introduce gadgets geared towards summer activities, such as waterproof cameras and portable cooling devices.
The travel and tourism sector gets the most significant boost. Airlines, hotels, and tour operators typically report peak earnings. In total, in 2023, the global travel industry achieved a remarkable year-on-year growth rate of 36.9%. Traffic, as measured in revenue passenger-kilometre, reached 94.1% of 2019 levels, a significant increase from 2022, when it stood at 68.7%, according to the International Air Transport Association.
In the retail industry, summer collections often drive significant revenue. Sales should rise at major retailers during summer if they get the selection right. Inditex, one of the biggest clothing retailers, said this year’s spring and summer collections “have been very well received by our customers,” adding: “Sales grew 7.1% to reach €8.2bn ($8.85bn), showing very satisfactory development. Sales in constant currency grew 10.6%.”
But not all businesses can successfully capitalise on the promise of summer. Retailers that fail to stock up on essentials like sunscreen and swimwear miss out on sales. Seasonal inventory management and anticipating the market is important.
Boosting sales during summer requires innovative strategies. Offering limited-time discounts and bundling products are effective tactics. According to a report by Retail Dive, 48% of consumers are more likely to make impulse purchases during summer sales events. Hosting events such as summer festivals and outdoor markets can attract large crowds and increase sales.
Eco-friendly product surge
The rise of eco-friendly products has become part of the summer scene. Consumers are increasingly seeking sustainable options, such as biodegradable beachwear and reusable water bottles. Companies embracing these latest trends can gain a competitive edge.
As environmental management becomes a hot topic, businesses can implement measures such as reducing plastic usage, promoting recycling, and conserving energy. A Nielsen report found that 81% of global consumers feel strongly that companies should help improve the environment.
MENA/GCC summer dynamics
The MENA region, particularly the GCC, experiences unique economic dynamics during summer. Elevated temperatures drive up electricity consumption due to increased air conditioning use.
According to the International Renewable Energy Agency (IRENA), electricity demand in the GCC can double during the summer months. This surge in demand has led to significant investments in renewable energy to ensure sustainable power supply.
Yet, “interest in renewable energy in the GCC has been on the rise in recent years,” IRENA said in another report. “With the region’s consumption expected to grow at a fast pace over the next two decades, renewables have become an important consideration in government strategies to diversify the domestic energy mix.”
Summer has a mixed impact on tourism in the MENA region. While some destinations experience a decline due to extreme heat, others, such as coastal areas, attract more visitors.
Traditional MENA tourist destinations, such as Egypt, Tunisia and Jordan, stand out in this respect, while political tensions are now a factor for Lebanon, historically a popular choice.
In the GCC, the retail and hospitality sectors adapt to summer by offering indoor entertainment options, special promotions, and summer festivals. These help draw tourists looking to escape extreme temperatures. Saudi Arabia’s Tourism Authority and General Entertainment Authority have made progress in this area. The UNWTO noted that the Kingdom “welcomed over 100 million tourists” in 2023, in what it called “an exceptional achievement”.
The international body added: “This remarkable accomplishment, achieved seven years ahead of its original schedule, not only underscores the Kingdom of Saudi Arabia’s emergence as a global tourism powerhouse but also highlights its leading role in the economic diversification and sustainable development of the tourism sector worldwide”.
And it pointed out that the progress made looked likely to last: “The Kingdom’s tourism sector has shown remarkable resilience, with inbound spending reaching over $37bn in 2023 and a significant increase in hotel keys across the Kingdom. These achievements are a testament to the Kingdom of Saudi Arabia’s commitment to creating a prosperous and sustainable tourism sector”.
Other successes exist among GCC nations. In 2022, travel and tourism in the United Arab Emirates were worth around $45.47bn, or around 9% of the gross domestic product, a measure of the size of the overall economy.
But some sectors see a drop in productivity. For example, construction companies implement midday work bans to protect staff from extreme heat.
Overtourism
There has been a global backlash over the impact of high tourism levels on some of the world’s most popular destinations. Protests have been held in the Canary Islands, Barcelona, and Athens, asking tourists to show more respect to local areas and culture.
Authorities in various destinations are implementing measures, such as alcohol restrictions in the Balearic Islands and a tourist tax introduced in Venice, Bali, and Bhutan.
The Japan Times reported that visitors will soon be banned from alleyways in the Gion geisha district in the city of Kyoto. Residents have grown tired of tourists in the district, and at the end of last year, they reportedly asked the city to take the issue seriously, as their neighbourhood was “not a theme park.”
Tourism expert Carina Ren, a professor at Aalborg University, told the BBC that bad behaviour from tourists isn’t new, but the volume of it has significantly increased. As well as new restrictions and taxes, other ways of curbing the problem have been tried, including removing certain bus routes from Google Maps in Barcelona to ensure capacity for locals.
