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UAE increases petrol prices for October

Motorists in the UAE will have to pay more for fuel from October following an upward price revision by the UAE Ministry of Energy in line with increasing global crude prices.

Effective October 1, the price of Super 98 will go up to Dh2.61 from Dh2.59 per litre, while Special 95 category petrol will cost Dh2.50, up from Dh2.48 per litre in September.

The price for diesel will rise by 12 fils per litre to Dh2.76 from Dh2.64 a litre in September.

On Thursday, global oil prices rose by one per cent as prospect of tighter markets grew with the impending US sanctions against major crude exporter Iran.

Front-month Brent crude futures were at $82.23 per barrel at 0650 GMT, up 89 cents, or 1.1 per cent from their last close, and just off Tuesday’s four-year high.

US West Texas Intermediate (WTI) crude futures were at $72.47 a barrel, up 90 cents, or 1.3 per cent from their last settlement.

Traders said oil markets were tightening ahead of Washington’s planned sanctions on Iran’s petroleum industry from November 4.

Commodity traders Trafigura and Mercuria said that Brent could rise to $90 per barrel by Christmas and pass $100 in early 2019, as markets tighten once US sanctions against Iran are fully implemented from November.

“We view that crude market risks are heavily skewed to the upside and whilst we are not explicitly forecasting Brent to rise to $100 per barrel, we see material risks of this coming to fruition,” Japanese bank Mitsubishi UFJ Financial Group said in a note to clients.

At its 2018 peak, Iran exported around three million barrels per day (bpd) of crude oil, equivalent to 3 per cent of global consumption. Iran’s September exports fell to around two million bpd as buyers around the world bow to US pressure and cut imports.The decision by Opec and allies at their meeting in Algiers recently not to immediately boost production is also spurring the oil price rally.

Mastercard an official partner of expo 2020 Dubai

MasterCard on Wednesday revealed as Expo 2020 Dubai’s Official Payment Technology Partner at the payments technology company’s Connecting Tomorrow Forum in Barcelona, Spain.

The unique visitor experience at the mega-event will be enhanced thanks to the partnership, which includes exploring the use of payment technologies from virtual reality to biometrics and voice shopping.

The deal includes developing innovative payment solutions that help deliver a personalised, seamless and cashless experience for millions of visitors from around the world. Mastercard will use technology including augmented and virtual reality, and biometrics such as facial and fingerprint recognition, as well as new payment methods including contactless and wearable technologies.

Reem bint Ebrahim Al Hashimy, UAE Minister of State for International Cooperation and Director-General of the Dubai Expo 2020 Bureau, said: “World Expos have always offered people their first experience of technologies that will go on to change their everyday lives.”

“In the future, people will grow to expect seamless experiences whenever they make a payment. Our partnership with Mastercard will not only make cashless payments easier for our visitors, but also allow them to try new and exciting innovations that enhance and become part of their Expo experience.”

Raghu Malhotra, president for the Middle East and Africa at Mastercard, said: “Our collaboration to reimagine the ease of payments as part of a seamless visitor experience at Expo 2020 Dubai represents the beginning of the next era of innovation.”

UAE central bank raises interest rates by 25 bps

The UAE central bank (CBUAE) said on Wednesday it was raising its repo rate by 25 basis points, and also raising interest rates on the issuance of its certificates of deposit in line with the increase in US dollar rates.

The Repo Rate applicable to borrowing short-term liquidity from CBUAE against Certificates of Deposits has also been increased by 25 basis points.

Certificates of Deposit, which CBUAE issues to banks operating in the country, are the monetary policy instrument through which changes in interest rates are transmitted to the UAE banking system.

FED rate hike sparks rise in borrowing costs

The Central Bank of the UAE on Thursday raised interest rates by 25 basis points for the third time this year in line with the US Federal Reserve’s decision to hike rates, paving the way for still higher borrowing costs that would have imminent implications across the financial sector.

The central bank’s move to raise its repo rate by 25 basis points as well as the interest rates on the issuance of its certificates of deposit was replicated in the same measure by other GCC central banks with the exception of Kuwaiti central bank.

Kuwait, which is the only GCC country with no currency peg to the dollar, said it is keeping its key discount rate unchanged at 3 per cent.

In a widely-anticipated decision, the Fed raised the benchmark interest rate to a range of 2 per cent to 2.25 per cent on Wednesday for the third time this year but showed no indication it would be more aggressive in efforts to head off inflation. The Fed has now raised the key rate eight times since late 2015, with one more expected in the final meeting of the year in December.

Analysts said the Fed decision comes amid worsening global trade tensions as President Donald Trump has doubled down on his confrontational stance, with steep tariffs on hundreds of billions of dollars in goods.

Financial pundit said in the UAE the rate hike would have direct impact on both businesses and residents by raising borrowing costs in auto finance, mortgage and personal loans.

Dr Ananda Kumar, chief executive for GCC operations at Bank of Baroda, said borrowing costs in the retail sector would increase in the range of 5 to 10 basis points while interest rates on customer deposits would also see a similar uptick.

“In corporate and other big-ticket deposits, the rate hike had already been factored in several days in advance in anticipation of the third hike in benchmark rates in 2018,” said Kumar.

Emilio Pera, partner and head of audit at KPMG Lower Gulf, said the rate increase would escalate borrowing costs, and likely improve banks’ profitability, marking further improvement for the sector this year after the robust performance of 2017.

“The hope remains that the broader industry will absorb the higher costs buoyed by the oil price recovery and given the strong performance of loans and deposits growth in August. However, with three interest rate increases already announced this year, we should closely monitor any signs of stress in case of a tick up in impairments during third and fourth quarter.”

“While a fourth hike at the end of the year is widely expected, it now remains to be seen if the Fed adopts a more hawkish stance in upcoming policy reviews considering that trade tensions with China and rising oil prices are weighing on the global economic climate,” said Pera.

 

Most analysts are concerned that the rate increase could put further pressure on liquidity in the economy, while leading to higher borrowing costs for both governments and corporations. In particular, property and tourism sectors are going to take adverse impact of the rate hike immediately as both are cost-sensitive.

While banks will offer better deposit rate for money deposited in savings accounts and fixed deposit instruments, the hike is likely to hurt the property markets badly as the mortgage cost will see an increase. This will inevitably be reflected through a drop in demand mainly in property investment, analysts said.

They argue that higher finance rate will make properties more expensive for residents and foreign investors, while the increased cost of bank funding for projects will result in a corresponding price increase in property sector. A similar impact will be seen on automobile sales as this year’s 75 bps rise in interest is bound to negatively influence purchase decisions. While residents will have to pay more interest if they borrow, savers among them are going to earn more interest, analysts said.

The impact will be felt in the tourism sector too as a strong dirham makes the UAE less price attractive to visitors, especially those from nations of weaker currency as they have to shell more of their nation’s currency to travel to the Gulf, analysts said.

The SME sector, which depends on bank or external funding for their business operations, will also have to take the brunt of the rate hike.

Since business in the UAE is often operated with low liquidity and low margins, the higher borrowing cost may push further the margins down.

Another fallout is the increased cost of raising debt from bond markets, posing further headwinds to the already slow economic growth. Monetary tightening in the wake of interest rate hike will have counter-productive impact in the GCC economies by compounding fiscal tightening unlike in the US where the economy is on an upswing.

Financial experts contend that the Fed’s monetary policy, which is geared to the needs of the US business cycle, is not suitable for the economies of the UAE and rest of the GCC, which are currently facing a period of lower growth.

Why travel and tour firms must go online more

Travellers today know that there is no shortage of options available to them, when it comes to selecting a tour or an outdoor adventure, and this is having a significant impact on the way they book, experts say.

Speaking at the second annual Travel Tech Middle East conference, travel and tour operators highlighted how there are lots of challenges that stem from the rate of technology adoption in the region.

“The Middle East is a diverse and fast growing market for tours and activities,” said Nabil El Shafeay, founder and CEO of Visit & Go. “Small family-run companies form the backbone of the tours and activities industry in the region. Online penetration remains low though, with 80 per cent of sales still being made offline.”

This creates several issues, especially with customers that like to make bookings at the last minute, he stated.

“Around 67 per cent of suppliers in the tours and activities industry in the Middle East operate without reservation technology – meaning they still use e-mails for bookings,” El Shafeay said.

“In addition, 34 per cent use Excel sheets to manage reservations. Booking confirmations in such cases can take up to or be delayed by 24 to 48 hours.”

Now compare this with customer expectations that lean almost overwhelmingly towards instant bookings. “Flights and hotels are booked instantly, but sadly this is not true for tours and activities,” he said. “Travellers want instant booking confirmations, and they prefer paperless bookings. Mobile is the leading and fastest growing booking channel in the region, yet two out of five suppliers still don’t accept online bookings; most don’t have live connectivity to third-party resellers. Lastly, only one-fourth of suppliers in the region support same day bookings via resellers, and 41 per cent require at least one day advance booking.”

El Shafeay also cautioned that it was important to keep in mind the fact that many travellers to the region like to make bookings only when they are at the destination. “Approximately 38 per cent of online bookings are made on the day of the activity; 53 per cent are made within a week of their trip and just 19 per cent are made in advance.”

“Digitalisation has given travellers a whole new set of choices,” agreed Leo Thomas, country manager for the Mena region at Insider. “Over 47 per cent of travellers visit different websites before making their purchases. The conversion rate increases more than 35 per cent when travellers experience personalised digital journeys.”

He added that due to increasing competition in the industry, customer acquisition is getting harder.

“Data today pushes us to do more,” said Albert Dias, co-founder and CTO at Musafir.

“It can help you draw some very powerful conclusions about your customers; and it can help customers to better manage their trips and bookings,” he added. “What if you can tell travellers with absolute certainty that their flight is going to be late, and that they don’t have to be at the airport for another two hours? The data to do something like this is all freely available on the shelf; the challenge is to get it to the customer in a timely manner. There is a change in mindset that needs to occur in the industry today.”

Meanwhile, delivering a memorable customer experience doesn’t have to be a very expensive move for a business, said Sanat Kagwad, business head of products at TechTree IT Systems.

Speaking at the event, Kagwad said that there are several myths that have been prevalent in the travel industry.

“It is a very common myth that delivering unforgettable customer experiences is going to be expensive for an operator,” he said. “This is certainly not the case if you have the right platform.”

Another very common myth, he revealed, is that businesses in the industry believe that they can buy their customers forever. The fact of the matter is that no one wins the price battle, he said. The last misconception that many businesses have is that customer experiences can only be mastered by new-age digital firms. The reality, he says, is that many traditional companies are better-placed with customer data and insights that can help them deliver the memorable experiences that travellers are looking for.

Statistics show that customers are five times more likely to transact with an organisation that delivers great customer experience. By 2021, 89 per cent of companies are expected to compete mostly on the basis of customer experience.

“If you have been operating in the industry for a while, then you are already well positioned because you know what customers like, and what they don’t really care for,” Kagwad said.

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