Bigger, better, taller…under water—Dubai’s hotels are focused on luxury and developers are rushing to one-up any record on the books as the emirate looks to maintain a longstanding policy of economic diversification. Tourism has, and will continue to be, a focus in raising Dubai’s global profile, said Sheikh Mohammed bin Rashid Al-Maktoum, prime minister of the United Arab Emirates and ruler of Dubai, in February when he released the new 8-year Dubai Strategic Plan for economic and social development.
Tourism is one of six strategic areas under the plan which follows upon the previous ten-year plan that started the emirate’s miraculous dash to the frontline of world attention. The name “Dubai” is seemingly synonymous with growth and on peopl’s lips around the world—hardly an accident for a place that has a tourism department with representatives promoting it in 14 foreign countries.
Extravagant hotels, sun-soaked beaches, political stability and shopping are the primary factors drawing increasing numbers of tourists to Dubai, Kenneth Wilson, a professor of economics and director of the policy and research center at Dubai’s Zayed University, told Executive.
“Business and commerce have always been here,” Wilson said. “Visiting for leisure is more recent, and Dubai is leveraging on its natural advantages,” like beaches and beautiful weather.
“Shopping has been a big focus in the last 10 to 15 years pitched at Europeans and people in the Gulf,” Wilson said.
The emirate has long been a trading post, and its souks were supplemented by the first shopping mall in the early 1980s—a construction that soon became a trend. Businesses pay no taxes so all of the shopping is duty free. Malls have become a staple in the city with over 50 currently built and more on the horizon.
In 2006, Dubai saw 1.875 million visitors, a 25% year-on-year increase. in the same year, they spent AED2.57 billion, a year-on-year increase of 50%.
The Dubai Shopping Festival, which drew 3.3 million visitors in 2005 based on the most recent statistics from Dubai’s Department of Economic Development, is a month-long affair started in 1996 featuring giveaways and entertainment like live music. Dubai’s souks, side-street shops and malls lure guests with discounts during the festival.
Shopping, however, is not the only thing Dubai’s malls offer. Mall of the Emirates, owned by the Majid Al Fattaim Group, houses an indoor ski slope, offering Lebanon a regional rival when it comes to skiing in the morning and going for a swim in the afternoon. If that weren’t enough, Emaar Properties is building Dubai Mall, which it bills as “malls within a mall,” on over 500,000 m2 of land and the Ilyas and Mustafa Galadari Group is working on the equally expansive Mall of Arabia. These ventures will include five-star hotels, ice skating rinks, movie theatres and plenty of retail outlets.
Welcome to the hotel Dubai
The hotel industry is thriving on the increase in tourism. Hotel and restaurant revenues accounted, in 2005, for 4.5% of the emirate’s gross domestic product based on the most recent statistics from the UAE’s ministry of economy. In 2006 the hotel industry, which includes hotels and hotel apartments, hosted 6.4 million people, trumpeted the Department of Tourism and Commerce Marketing (DCTM) proudly.
The DCTM’s own success in advancing Dubai from the Arabian Peninsula’s leisure spot to an international destination shows in the fact that residents of the United Kingdom have flocked to Dubai’s hotels in numbers larger than any other nationality from 2002 to 2006, with 687,138 coming that year. The last time the Brits were beaten as the world’s most prolific Dubai travelers was in 2001, by Dubai’s second most common visitor group—Saudi Arabians.
In 2006, the room occupancy rate for hotels in Dubai stood at an average of 82%, said Daniel Hajjar, corporate vice president of sales and marketing for the Rotana Hotels chain, one of the UAE’s leading hotel operators. The good performance of the hospitality sector last year actually marks a dip from 2005’s average occupancy rate of 84.5%.
This is the first drop in average room occupancy in a decade according to DTCM statistics, but back in 1997 hotels had to make do with occupancy rates of around 65%, full twenty percentage points lower than today, while the room capacities were much smaller than today. Thus, industry managers like Haj-jar are confident today that the hospitality industry will maintain its high performance rates even as the emirate’s number of hotel rooms is expected to more than double in the near term from the current 35,000 rooms.
Growth from the Top
Dubai’s five-star hotels, like practically everything else there, have been increasing in number over the years. The five-star classification system was applied to all Dubai hotels at the beginning of 1999 and between 2000 and 2005, 14 new ones have opened.
“Dubai has been very, very successful in positioning itself as a high-end travel destination,” said Rohit Talwar, co-founder of think tank Global Futures and Foresights. Talwar and his business partner, David Smith, wrote a report about the future of tourism in the Middle East to be released in early May at the Arabian Travel Market, a major regional industry meet held in Dubai. The report will highlight the economic importance of luxury hotels. “They’re attracting high-end business people, high-end travelers,” Talwar said.
Wilson also sees a link between Dubai’s investment in luxury hotels and its direct foreign investment strategy. “If you’re bringing in wealthy people who can afford that type of holiday, they also have money to invest as well,” he said. “If you build it, they will come.” This works because Dubai is “a sea of calm” in a tumultuous region that is seen as rapidly growing, attracting investors who will see they will get a return on their investment.
Talwar agreed that Dubai has been immensely successful in its branding strategy. “Dubai has been a bit of a model for the region in going out and telling the Dubai story and more countries are looking to follow that model,” he said. Syria is looking to establish tourism offices abroad, and Turkey is targeting the wealthy US visitor by putting more money into marketing overseas, he added.
The Burj al-Arab, one of many Jumeirah Hotels ventures in the emirate, opened its doors in December 1999 claiming to be the tallest building used only as a hotel and sits on its own island of sand and rock dredged from the floor of the Gulf. The next record-breaker, projected to open at the end of this year, is the Crescent Hydropolis Resorts’ Hydropolis Hotel, the first underwater luxury hotel. (The world’s first underwater hotel is the 2-bedroom Jules’ Undersea Lodge off Key Largo, Florida.)
But the strategy for marketing a new hotel or any Dubai experience through a “first in the world” moniker may have to change. “Up until now these grand developments have had time to bask in the glory of being the Burj al-Arab,” for example, but there are so many things coming in the next few years that new developments will have a smaller window of exclusive attention, Talwar said.
Even with all the hustle-bustle of constant construction and tourists wandering about, Dubai residents, Wilson said, do not seem to mind the intrusion. This could have something to do with the fact that 80% of the emirate’s population is comprised of expatriates. Either way, Wilson said there was, to some extent, segmentation in the market where smaller places only the locals know not responding to the rise in prices that comes with an influx of wealthy tourists.
Most of these guests “are risk adverse. They want to stick with what they’re coming there for,” he said. “They don’t want to go off the beaten track and find these other places. That’s not what they’re there for.”
Ambitious Goals
Dubai’s development goals have been fueled by a desire to free itself from depending on oil revenues. It’s made significant gains on the latter. The contribution of oil revenue to GDP plummeted to 10% in 2000 from 46% in 1975, working its way further down almost every year since. The neighboring emirate of Abu Dhabi has 90% of the UAE’s estimated 97.8 billion barrels of oil, leaving Dubai with little choice but to expand its economic horizon.
Since the 1970s the ruling Maktoum family, whose uninterrupted reign began in 1833, have set their sights on making Dubai a world player. Sheikh Rashid bin Saeed Al Maktoum dredged the Dubai creek (Khor) separating Dubai City from Deira to allow easier access for large trade ships, built two ports and established the first free zone where foreigners can completely own a business, repatriate all of their earnings and not pay import duties. There are currently nine free zones in Dubai with more in the works. Outside the free zones, opening any business require that a UAE national owns 51%.
Under the Dubai Strategic Plan (DSP), the ruling family wants tourism to contribute significantly to the further expansion of GDP, even as the plan’s review of the past five years shows that trade was the largest gainer in contributing to the wealth of Dubai while the share of tourism in GDP actually contracted by 0.8%. In its forecasts, the DSP does not specify what future share of tourism in national production it aims at. The plan expects the total real GDP growth to clip along at 11%, which may seem a lofty goal, but the emirate claims that the plan announced in 2000 for 2010 was realized by 2005, including annual real GDP growth of 13.4% per capita real GDP growth of 6.1%.
To achieve his goals, Sheikh Mohammed said the emirate should focus on the sectors with “strong competitive advantage…that are expected to experience future growth globally. The sectors of strength are tourism, transport, trade, construction and financial services, in addition to the creation of new sectors with sustainable competitive edge.” The ruler of Dubai acknowledged, however, that the tourism sector will face some challenges in the future especially with a focus on “public service excellence.” According to the DSP projections, Dubai needs to add close to 900,000 new workers to achieve its growth targets.
Talwar said through the course of completing the report he co-wrote, he ran into people saying the tourism sector would need 1.6 million new workers. In his view, tourist destinations will need to pay attention to having high staff-to-guest ratios to provide all the necessary services, the quality of environment they create and what new features they add to keep the place fresh. “You can only talk so long about being able to play tennis on the roof of the Burj al-Arab,” he said.
Wilson isn’t too worried about not freshening things up fast enough. Dubai’s rulers are smart. “They don’t sit and rest on their laurels,” he said. “They seek change. The people who run this place are very smart and shrewd.”
The smarts will certainly be needed. While the intra-GCC tourism is a fairly safe bet for continued development of Dubai business, image and fear factors weigh heavy in international tourism. A new surge in tensions surrounding Iran and a longer security crisis in the Persian Gulf could cause British and other European visitors to switch their attention from Dubai to competing destinations in a blink. In this sense, Dubai is very much part of the Middle East, where “tourism will remain a fragile commodity as long as our region remains on the headlines of CNN and BBC,” as Rotana’s Najjar pointed out in a recent presentation on challenges to regional tourism.
Additionally, tourists with a medium to strong spending profile increasingly emphasize issues such as environmental integrity, social justice, and cultural authenticity in their travels, which incidentally also are main points of emphasis in the tourism development policies of the UN World Tourism Organization.
To be the world’s largest shopping mall and safe indoor playground for all ages may well be enough to win a place in the expanding global leisure society where tourism and travel is one of the best faring industries. However, being a single destination, and one that is copied by others nearby, is not the crown of tourism development in an industry where a center of attraction is required to offer more and more niches and activities with lasting appeal in order to capture the hearts and minds of visitors over and over again.
Dubai is making efforts to build a cultural and social scene from scratch and broaden its attractiveness beyond the current buzz the emirate has succeeded in creating. The challenge is far from over. “At the moment that’s still a lot of hype around Dubai, global interest,” Wilson said. “Everyone’s saying it’s interesting, there’s a lot to see, it’s unbelievable, but when it matures, in the next phase of development, what it will look like? That’s a very difficult question to answer.”
