Dubai restaurants risk out-pricing customers on alcohol costs

Dubai Tourism

• Third-most expensive city for beer
• Alcohol supplied by duopoly
• Rising costs pressure margins

The cost of eating out in Dubai’s restaurants is rising, especially if you’re washing your meal down with an alcoholic drink.

Last year, Dubai was named the third-most expensive city in the world for a half-litre of draught beer at an average of $10.89, according to price comparison website Numbeo. Qatar was number one, followed by Oman at number two.

That was before a 30 percent tax on alcohol was reintroduced at the start of this year. Having a duopoly in the supply of alcohol in the emirate, the most populous in the seven-member UAE federation, does not help.

“Alcohol is an absolute issue in both retail price as well as taxation,” Naim Maadad, founder of Gates Hospitality, tells AGBI. “With liquor, sadly what we’re doing now is we are out-pricing ourselves by such heavy taxes and levies.”

Supplied

Dubai and Tel Aviv were named as the most expensive cities in the Middle East for expatriates in a survey last year by US consulting firm Mercer, but that included many other cost of living factors beyond restaurant dining, such as rent, power and transport. 

Unlike Tel Aviv, though, more than 90 percent of Dubai’s population of 3.8 million are expatriates.

Alcohol in the emirate is supplied by only two companies: Maritime and Mercantile International (MMI), a subsidiary of Emirates Group; and African & Eastern, a joint venture between local investors and AB Inbev, the world’s largest brewer.

The Dubai government’s tax on alcoholic drinks was suspended at the start of 2023 in an effort to make the city-emirate more affordable for visitors and residents, although many hospitality venues did not pass on the savings to consumers.

“We need to open the market up and lose the duopoly that we have,” says Maadad. “My intent is to provide alternatives so that people can buy [alcohol], like we do in restaurants – the five-dirham shawarma and the 500-dirham steak.” 

The price of alcohol aside, Stefano Mihalitisianos, Middle East managing director of Tasha’s Group, a South African restaurant business, says other rising input costs – including labour – are putting pressure on profit margins in Dubai.

“The price of what you see is unfortunately a factor of the many, many inputs that come with it,” he says at the UAE Restaurants Group Open Day this week. “We are merely reacting to what’s happening around us and trying to navigate the storm.” 

Inflation in Dubai is still tracking at close to 3 percent, down only a tenth of a percentage point at 2.9 percent year on year in December from 3 percent the month before, according to Emirates NBD bank. Food and beverage inflation, meanwhile, accelerated in December to 1.3 percent annually, up from 1.1 percent the month before.

“There is this Dickensian view that the streets are paved with gold here,” says David Singleton, an independent adviser to UK-based hospitality and food and beverage companies looking to do business in the UAE. “It is not easy.”

• Dubai distributors to swallow 30% tax on alcohol brands
• Dry January in Dubai – renew, reset and resist temptation
• Heineken joint venture to build brewery in Dubai

Ahmed Ahil, director of tourism at Dubai Economy and Tourism, says the government body “encouraged” restaurants to be “more realistic in terms of the pricing” but conceded that it is a free market and that they can effectively charge what they want.

“It’s always encouraged to be mindful of tourists and the residents’ requirements, and what they can afford to pay to make sure they come once and they come again and again and repeat their visits,” he says.

The value of the UAE’s food services sector is set to hit $23.2 billion this year, says Maha Al Gargawi, vice-president of business advocacy at the Dubai Chamber of Commerce, and reach $52.7 billion by 2030.

More than 4,000 restaurants are registered with the Dubai Chamber, up about 25 percent compared with 2023.