The second Arabian Hotel Investment Conference was held in the sumptuous environs of Dubai's Madinat Jumeirah and attended by over 800 delegates from countries around the world as well as from the Gulf region. As in its inaugural year of 2005, the conference combined plenary sessions with a wide range of breakout sessions, some focused on regional matters, others on issues facing the hotel industry at large, as well as several generously hosted receptions. This being Dubai, the social side had to be a little larger than life. An evening overlooking the Arabian Sea was followed by one alongside the Middle East's first indoor ski slope; the final al fresco evening included knife wielding dancers and a firework display. But, ran the over-arching question of the conference - was this 'Oasis or Mirage?'
The speakers at the plenary sessions had few doubts. Not only will Dubai's astonishing growth continue but many countries in the region - taken to be not only the GCC countries but further a-field in the Middle East and also parts of Africa - are set to grow their tourism markets substantially. Nick Van Marken of Deloitte cited buoyant regional economies, successful diversification, the oil price bonanza, IPO fever, regional and global investment in tourism and the rise in regional private equity as all indicators of a positive future for inbound tourism. Currently the market is dominated by the branded upscale and deluxe hotels but steadily limited service hotels are coming into the market and while most of the brands in the GCC remain international, there are an increasing number of successful locally grown brands. Chief among these is Jumeirah, which is exporting to the West, and Rotana which, while staying in the Middle East, is diversifying by introducing a budget brand, Centro.
Gerald Lawless, CEO of Jumeirah Group, told the audience that visitors to Dubai had doubled to six million over the past five years and yet 70% of Emirates Airline passengers touching down at Dubai airport still do not get off the plane. These represent a vast market yet to be tapped, both as short break visitors and travellers to the dramatically increasing range of sporting, cultural and event-related attractions now being developed. Of the six million who did step off the plane last year, 34% were from other GCC countries while 31.5% were Europeans of which by far the largest single majority were the Brits. However, as several speakers pointed out, visitor growth in the medium term will come particularly from Asia and the greatest demand will overwhelmingly be for considerably more budget hotel stock.
Thus far, the message of robust optimism continued in much the same vein as at the 2005 Arabian Hotel Investment Conference but what was different was the tangible evidence of new concepts and products coming to fruition. One of these, launched at the conference, was Shaza Hotels which Georges Bekhazi, its head of development, claimed to be demand driven as the extent of inter-regional travel accelerates. In a joint venture with Kempinski, Shaza Hotels has been designed as a lifestyle hotel brand reflecting the traditions of Middle Eastern hospitality within a contemporary, 5-star environment - a first for the region.
Meanwhile, in Dubai alone, Festival City is now opening in phases with an Intercontinental and Intercontinental Residence Suites as well as a Crowne Plaza due to open their doors next year and with a W signed up, while Sports City, Dubai Land, Business Bay and Healthcare City are on their way.
Oil rich Abu Dhabi is also rearing its tourism head in a bid to diversify and create new opportunities for investment with the opening of such emblematic hotels as the lavish Emirates Palace hotel. Currently, 75% of visitors here are business travellers but the Emirate plans to take the percentage of leisure visitors to 50% by environmentally sensitive expansion of the offering; in Abu Dhabi every proposed development has first to be sanctioned by its Environmental Agency.
To the South, Oman is rapidly becoming the favoured destination for tourists seeking an authentic slice of Arabic history and fabulous natural beauty. Other countries especially singled out for their tourism potential included Egypt, which next year introduces an open skies policy, Beirut, Jordan and, at the upscale level, Turkey; Reto Wittwer, president and CEO of Kempinski also flagged up parts of Africa, not least because there is less competition for hotel operators.
Brand Crossroads
One of the breakout sessions looked into the strategies of the major international hotel chains in the region, asking if they could successfully develop a local brand and if the region could really build its own brands able to compete globally. The speakers, representing Rotana Hotels, Shaza Hotels, Armani Hotels & Resorts, Rezidor and Jumeirah, each had their tale to tell but the overall spirit was summed up by Christopher Hartley of Shaza in stating that there was enough opportunity in the region for every type of brand culture to do well. An impassioned Bruce Hutchinson from Armani saw hotel history being made in his company's approach. Funded by Dubai based EMAAR, the company intends to grow its group to some 30 hotels and resorts in gateway cities and super luxury hideaway destinations. As he pointed out, the Armani name has reach even in places where it has no shops and this makes for a faster route to market; the future means more hotel brands, he forecasted, because the consumer increasingly wants to differentiate. Gordon McKinnon of Rezidor supported this, arguing that brands are a way of expanding into new geographic sectors. Bill Walshe of Jumeirah applauded Dubai's early recognition of the benefit of tourism, its open skies policy and the value the government placed on establishing quality brands a.k.a. Emirates Airlines and Jumeirah. Brand Dubai, he said, was very strong.
The Integration of Sports in the Hospitality Industry
A particularly thought provoking session looked at sport as a lever to tourism. Greg Sproule of IMG Middle East believed that the model was established by Barcelona when the Spanish government recognised the significance of its Olympic Games win and spent US$30 million developing tourism and making Spain the golfing destination. Today, more and more people are basing holidays around attending international sporting events and they are also prepared to spend a lot of money improving their own game. Dubai is taking the sports initiative in a major way with the declared intention of becoming the sports capital of the Gulf. So, no surprises there! U. Balasubramaniam, CEO of Dubai Sports City, outlined the plans which, he said, comprise the doing as well as the watching, well being, education and lifestyle. Sporting icons have been brought in to stamp their signature on particular sports, a soccer academy will be set up managed by Manchester United and the International Cricket Council is to be based in Dubai. World beating sports are becoming part of Brand Dubai. Next stop, the 2020 Olympic Games.
Islamic Finance and How it Works in Hospitality
Islamic funds are booming and are a natural fit for the hotel industry according to the panel which gathered on the second day to explain how such funds are structured. Some US$25 billion is currently under the management of Islamic funds attracting partners from outside the Gulf, as well as within, as banks seek innovative new products and the funds become more flexible and commercially realistic. The attraction to many is that Sharia compliant funding predicates a partnership between lender and borrower in which profits, as well as risk, are shared. This is because interest based and speculative contracts are forbidden, equity replaces debt and the financing requires an asset. In some recent cases, an Islamic fund has been used to support the development of a hotel through to the end of construction and has then been replaced by a traditional fund once the hotel is live with non-Sharia compliant activities, such as drinking alcohol.
Oasis or Mirage?
So what might put the brakes on the tourism express in the region? Jean-Claude Baumgarten, president of the WTTC cited two key barriers to growth: poor infrastructure and lack of people attuned to working in the hospitality sector. Jean-Gabriel Peres of Movenpick agreed, adding that poor environmental strategies were also a threat. Other speakers pointed out that the weak US dollar, to which the Gulf currencies are tied, could prove a problem and that while the world is increasingly becoming inured to occasional terrorism incidents, a major atrocity does carry the risk of de-railing the train. For now, however, in the words of Selim El Zyr, president of Rotana, "the future is an oasis".
Hotel of the Future
Think of hotels as gift-wrapped presents. This was the proposition from Amar Lalvani, vice president of W Hotels development, when he spoke in the session about hotels of the future. "We give customers different presents - different brands for different people". The question was which was more important - the wrapping or the contents? The wrapping, or the design, makes a connection with the guest but operators also have to deliver on what is inside. This means understanding the guest a lot better. Hoteliers, the panel believed, have become much better at this over the past two decades but it was now time for them to go deeper and understand the complexity of customer thinking.
AHIC - www.arabianconference.com
28-30th April 2007, Madinat Jumeirah, Dubai, U.A.E
