Forty years ago, Dubai was nothing more than a small fishing village where people came to dive for pearls. The fortunes of the city were completely transformed when oil was discovered in 1966.
However, Sheikh Rashid bin Saeed Al Maktoum, the ruler at the time, could see that the oil reserves would not last forever. In a bid to diversify the economy, he created a vision of a city that would rely on manufacturing, construction and, of course, tourism.
In the last six years, Dubai has seen a frenzied construction boom like no other. It is the city of superlatives: the most luxurious seven-star hotel, the world’s tallest building and, soon, the world’s largest airport.
The US magazine Wired recently used NASA images to depict the pace of development in Dubai:
The city bears testament to the transformative power of travel and tourism. But, in these troubled times, can the ‘if we build it, they will come’ philosophy hold out?
Deloitte managing partner for tourism and hospitality in the Middle East Alex Kyriakidis said: “Until the third quarter of last year, Dubai had the highest RevPAR (revenue per available hotel room) in the world. In the downturn, Dubai is feeling the pain of its feeder markets feeling the pain.
“Dubai has suffered a double whammy. People are not travelling because they are concerned about their jobs and, at the same time, the pound has crashed against the dirham.”
The latest hotel performance figures from Deloitte reveal the extent of the damage. Occupancy declined 16% in the year to April, down to 72%. Hotels are responding to the softening in demand by slashing their prices, leading to a 34.5% drop in RevPAR.
Not all hotels are suffering equally. Beach hotels are performing well, with some seeing occupancy of up to 90% earlier this year. However, city hotels, more reliant on the business market, have fallen as low as 50%. Most hoteliers report that travellers are staying for fewer days and spending less money in the resorts.
One sales manager of a city hotel said: “Hotels have been quick to react. We’ve brought our prices down and we’ve had to take the hit but it has worked.
“Some beach hotels are noticing the impact of Atlantis, the Palm. There is more choice now; it is not like before, when all the hotels were full.”
Although 16% sounds like a significant drop in occupancy, Kyriakidis said it should be kept in perspective. “I’d say the market is now doing very well, rather than stratospherically well. Dubai is still among the highest performing regions in the world.”
Construction workers are downing tools as just over half of current projects have been scrapped or delayed. The cranes are still there – but a closer look reveals many are sitting idle. “Those that are past the point of no return are going ahead,” said Kyriakidis, “But I don’t see anyone in their right mind signing up for new hotel developments in the next five years.”
But Dubai is fighting back. The Dubai Department of Tourism and Commerce Marketing (DTCM) is working hard to drive volume during what will be a challenging summer. A campaign is set to launch in the next couple of weeks with tour operators including Gold Medal, Virgin Holidays and TUI Travel. Online adverts, posters, trade advertising and direct mail will focus on promoting special offers.
With prices about 25% down on last year, Dubai is now more accessible than ever. Despite the discounts on offer, Dubai is still keen to maintain its position as an upmarket destination. DTCM director Ian Scott said: “There are some more affordable options, but Dubai is still a premium destination and will stay that way.”
As for the future, he remains upbeat. “We still have a clear strategy in place to become the world’s leading tourist destination. I’m confident if you ask me again at the end of the year I’ll be feeling positive.”
Dubai is still forging ahead with a host of ambitious projects, from the Dubailand theme park, to a second man-made Palm Island. The government is also continuing to invest in the infrastructure, with new roads, a metro system and monorail all under construction. The DTCM also maintains the number of rooms in Dubai will triple by 2015, in line with the current leader Sheikh Mohammed’s vision.
Cruise is another growth area. Costa Cruises is to position two ships in Dubai this year and Royal Caribbean’s Brilliance of the Seas will be based there from 2010.
Economists, however, do not predict such a speedy recovery. Kyriakidis foresees a small amount of growth next year, but predicts problems of over-supply in the coming years. “In the next three years, the number of quality hotel rooms will increase from 18,000 to 35,000.
“Even if the visitor numbers are good, it would be impossible to keep up the high levels of occupancy we’ve seen in the past. I predict occupancy will stabilise at 60% to 65% in three years. But many countries would be happy with that figure.”
There is no doubt Dubai is suffering – but no more than any other major city in this global recession. So why are media observers so keen to shout about Dubai’s fall from grace? Perhaps because Dubai’s own voracious PR machine has been so quick to shout about its achievements, and so reluctant to report anything negative.
“Some people seem to want Dubai to fail,” said Scott. “The media singles it out when plenty of other places are suffering more. But we will invest our way through it and come out the other side.”
Selling Dubai
Dubaiupdate.co.uk is an online resource set up by the DTCM to offer agents advice and resources to help them sell Dubai.
The site has been revamped to offer more content including events listings, pictures to download, training material for shop managers and cruise information. Agents can also sign up for a monthly e-newsletter with the latest news from the Emirate.
Some 6,000 agents have now signed up to the Dubai Expert online training programme. It has been altered so there is less reading. “We know agents are busy so we wanted to make it as efficient as possible for them,” said Smith.
The DTCM is running 13 fam trips to Dubai this year. For the first time they will be themed trips that focus on sports and activities, shopping and wellness, and Dubai for couples. Smith said: “With Dubai you need to see it. You can’t experience the excellent service or dinner in the desert by doing a training programme.”
The department is continuing to host networking dinners for agents in conjunction with tour operators. It will host 14 across the UK this year.
- Keep up with Dubai developments with DTCM’s information zone on TWacademy