Those who remember the boom times will recall the plans then to build Hydropolis, the world’s first underwater hotel, off the Jumeirah coastline. The idea sank with the onset of the economic meltdown only now to resurface with the news that Dubai Drydocks World have signed an agreement with a Swiss-based company to build similar hotels in the future.

This week saw HH Sheikh Mohammad bin Rashid Al Maktoum inaugurate the 19^th Arabian Travel Market. With over 25,000 visitors and 2,400 exhibitors, it has proved yet another bonanza week for the Dubai economy.

The importance of tourism to the Dubai economy cannot be over-emphasised as it now contributes 31% to the emirate’s GDP. This is set to increase in 2012 as the authorities are anticipating an impressive 10% growth which would bring the number of tourists to well over ten million. For the UAE as a whole, tourism brought in US$ 6 billion last year.

With a 9% quarterly growth in the number of hotel guests (and revenues up 24%, to US$ 1.5 billion, on the corresponding 2011 quarter), the hospitality industry continues to expand. It makes economic sense then for Istithmar World – a Dubai World subsidiary – to have announced that it has just spent US$ 250 million to buy out the 50% stake in the Atlantis Hotel from Kerzner International.

Good and bad news this week for the Dubai government’s coffers. Higher utility tariffs have seen DEWA save more than US$ 250 million as consumers paid higher rates in addition to a fuel surcharge. This halved the projected increase in the demand for natural gas and the money saved has reduced the cost to the Authority in providing electricity and water to its users.

On the other hand, it seems that petrol continues to be subsidised to the tune of US$ 1.5 billion as current federal legislation dictates that the Dubai-owned ENOC (and its subsidiary Eppco) have to sell petrol at subsidised prices (currently at US$0.46 per litre). Unlike Abu Dhabi, which has a plentiful supply of crude, Dubai has to buy from the international market and at prices of over US$ 100 per barrel, it is hurting!

Further signs that the local economic environment is improving came with the news that JAFZA is looking at repaying a US$ 2 billion sukuk, due in November, six months early. This is a welcome sign that Dubai’s creditworthiness continues to improve on the world stage.

On the local market, Emaar Properties announced a 44% increase in Q1 profits to US$ 170 million aided by increased property sales in Dubai and strong earnings from both its mall and hotel operations. The company has an asset base in excess of US$ 16 billion.

The Dubai Financial Market Index weakened over the week to close 70 points down at 1582 – perhaps indicating that the Q1 bear run is over for the summer. April saw its market capitalisation fall almost 1% to US$ 52.4 billion with a 40% drop in shares traded to 4.7 billion.

The eurozone debt crisis is spreading with the news that annual unemployment in Europe has jumped from 9.9% to 10.9% or 17.4 million people. No wonder that the stock markets were rattled. When you consider that Spain’s jobless rate at 24.1% is the highest in the developed world and that other countries such as Greece (21.7%), Portugal (15.3%) and Ireland (14.5%) are not that far behind, it seems that unemployment – rather than the initial debt problem – will be the tipping point for further strife on the continent.

With German unemployment levels at 2.9 million and rising quickly enough to cause concern, there are some analysts who would not be surprised to see this European giant fall into recession as well.

As countries sink further into the abyss, it seems strange that some politicians think that austerity is the solution whilst others consider borrowing even more money to be the answer. Either measure is doomed to fail.

Unfortunately for Dubai, it is not immune from the impact of these European problems and it has to shield itself as best it can from their negative impact. Whether it will succeed or not remains to be seen but we are in for a long hot summer.