Through its diversification thrust, Abu Dhabi has succeeded in reaping the benefits both of oil and gas and of the services sector, including tourism, through deliberate government action. Diversification and innovation have been key drivers in all sectors of the economy, including tourism, and innovations in one sector have spawned innovations in others. Drawing on literature sourced from secondary data, including government documents and publications available in the public domain, this article argues that innovation in various sectors can facilitate tourism diversification, innovation, and product/market development. The authors propose a diversification and innovation model, arguing that these aspects are inter-related and that their relationship is cyclical. Diversification and innovations are generated from and influenced by any economic, social, or institutional milieu and by entities such as government, business, and non-governmental organizations The article contends that Abu Dhabi’s new growth path should be geared towards small and medium enterprises in the boutique and lifestyle lodging business, so as to spread the benefits of its success in the tourism industry to the broader population through diversifying the emirate’s “traditional” hotel market.

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