Hoteliers capitalise on Expo 2020 potential

Expansion for luxury and mid-market, as well as leisure and F&B, but concerns raised over availability of talent.

Dubai’s successful bid to host Expo 2020, announced on November 27 in Paris, will attract more than 25 million visitors to Dubai between October 2020 and April 2021, said Dubai’s Department of Tourism and Commerce Marketing (DTCM) director general HE Helal Almarri.

To meet the needs of this tourist boom — 70% of which will come from outside of the UAE — DTCM expects to have to double Dubai’s hotel inventory to around 164,000 hotel and hotel apartment rooms within the next seven years.

This is in line with DTCM’s previously announced Tourism Vision 2020, which aims to attract 20 million visitors to Dubai by 2020 — a figure that stood as a target regardless of the Expo bid outcome.

Almarri told Hotelier Middle East: “Dubai’s Expo bid is part of long-term vision that ensures sustainable national development and a prosperous future for the UAE.

In May 2013, His Highness Sheikh Mohammed approved our Tourism Vision for 2020, a strategy which sets a clear path towards developing our tourism industry and furthering its contribution to Dubai’s economy. Although this Vision is separate to the Expo bid, we can now leverage the hosting of Expo 2020 and the focus it will place on Dubai as a means to attract visitors to the emirate.

“The impact on the tourism industry will be substantial – between October 2020 and April 2021, Expo will attract more than 25 million visitors, 70% of which will be from outside the UAE – the largest number of international visitors in Expo history,” continued Almarri.

“A number of sectors will benefit, including construction, engineering and transportation, and of course the hospitality, retail and aviation sectors will experience a significant positive impact.

“DTCM will now work with its tourism partners in both government and the private sector to put in place the infrastructure and processes needed to meet the demand of the 25 million visitors we expect at Expo 2020.”

With regards to hotels, he said: “We currently have in the region of 82,000 hotel and hotel apartment rooms in Dubai and estimate that by 2020 we will need to roughly double that in line with the Tourism Vision for 2020, which includes the target figure of welcoming 20 million visitors per year to Dubai by 2020 – this will be more than enough rooms to cope with the demands of Expo.”

Article continues on next page ...

ROOMS NEEDED
By the end of 2015, the current pipeline shows that there will be approximately 33 more hotel establishments with 8500 more rooms added to Dubai, revealed DTCM.

While hotels are continually being added to the pipeline, the numbers suggest capacity for another 73,500 rooms, which presents significant opportunities for hotel operators to sign new flags over the next few years, in order to reach the 164,000 target for the emirate.

Already, financial incentives are in place to encourage mid-range hotels, with eligible three- and four-star hotels to be granted a concession on the 10% municipality fee, which is levied on the room rate for each night of occupancy.

According to Al Marri, the initiative is designed to incentivise hotel owners to bring forward their construction timelines, creating more mid-range hotel rooms in Dubai more quickly. But are hoteliers taking the bait?

At Wyndham Hotel Group, regional vice president for the Middle East and Africa Bani Haddad said he saw more potential to develop the company’s budget and economy brands following the announcement of the win.

“With the estimated number of visitors for the Expo, we are preparing ourselves for another very strong development cycle. We have actually already started receiving enquiries from developers on the back of the announcement! You also have to think that with Expo 2020, Dubai’s current boundaries as a city will expand significantly to cater for both the Expo and also for the new DWC airport,” said Haddad.

“We see opportunity across the board. We anticipate a strong demand for our upscale Wyndham Hotels & Resorts brand, but to be able to attract and accommodate the anticipated 25 million visitors, we also see significant growth for our budget and economy brands such as Ramada Encore, the select service tier of our established Ramada brand, and the iconic Days Inn and Howard Johnson brands.”

Rezidor is also “actively pursuing opportunities” to expand its Radisson Blu and Park Inn by Radisson brands, said Mark Willis, area vice president.

“The expansion of Dubai towards Jebel Ali is creating more sub-markets for our various brands, with or without Expo 2020. Having said that, this historic event will present itself as a greater trigger for positive sentiment across the economy, the emirate and the country, with more hotel and serviced apartments opportunities arising in the Jebel Ali area as a whole and closer to the launch and expansion of Dubai World Central Airport,” Willis observed.

“We see an opportunity in each master development as sub-markets are created. The port of Jebel Ali, the area’s industrial zones and the Limitless development along Sheikh Zayed Road also present themselves with fantastic opportunities.

We will be able to offer the right product and the appropriate positioning in the most suitable location. The decision is based on the type of demand expected, the market opportunity and a sound investment potential for our owners.”

Willis added: “The need for budget and mid-market hotels is stronger than ever as Dubai works towards attracting growing numbers. Park Inn by Radisson is a brand and product that offers a real estate efficient, midscale product to cater to not only mid-market demand, but also the new and evolving generation of travellers.

Such a product also offers investment opportunities to investors aiming to capitalise on the large gap in the market in various locations around Dubai and the UAE”.

He also said that hoteliers needed to think beyond Dubai in terms of the potential afforded by Expo, with business in the neighbouring emirates to increase too.

“We have also to consider the infrastructure that is critical to the hosting of the Expo and developments such as the new Al Maktoum airport which will provide extra capacity to Expo visitors in 2020. It is expected the pace of development in and around Dubai World Central will increase in order to meet infrastructure requirements needed for hosting the event.

The knock-on effect of this would be the increased demand for accommodation, restaurants and facilities in this area and, as our hotels on Yas Island Radisson Blu and Park Inn by Radisson are close to this area, we expect increased business to these properties,” said Willis.

Article continues on next page ...

SPACE FOR LUXURY?
Among luxury operators, there were mixed views as to the impact, with local companies Jumeirah Group and Emaar Hospitality remaining bullish on development.

“We are exploring expansion options for all our brands that will offer truly distinct guest experiences,” said Philippe Zuber, chief operating officer, Emaar Hospitality Group.
At Jumeirah, Nicholas Clayton, chief operating officer, said opportunity extended beyond the traditional hotel product.

“The Expo will make the world sit up and take notice — and deepen their understanding of what Dubai genuinely has to offer, not just as a place to visit on holiday or on business, but as a home to build a life, a family, a career or an enterprise. In the bigger picture, we expect to gain in terms of business, access to great talent and opportunities for growth.

“In addition to developing and operating more hotels in the UAE, the winning Expo bid has also inspired us to further develop our capabilities within our restaurants and wellness businesses,” Clayton revealed. “These specialised sectors have the ability to grow on an independent basis given the overall demands of the market.”

Of the group’s portfolio he added: “Jumeirah currently operates eight hotels in Dubai and one in Abu Dhabi. We also operate Wild Wadi waterpark and the Emirates Academy of Hospitality Management. Furthermore, construction has started on a new 430-room luxury hotel next to Mina A’Salam, which will be complete in around two years.

Our growth strategy is centred on expansion in the Middle East, Africa and Asia — and as the leading luxury operator in the UAE, we expect to see new opportunities emerge as investors realise the further potential of Dubai and Abu Dhabi as the prime location for successful luxury hotels”.

However, at Fairmont Raffles Hotels & Resorts, Francois Baudin, senior vice president development, EMEA, said the company “did not expect any particular impact on our business development driven by Expo 2020”.

He explained: “FRHI Hotels & Resorts brands reached a certain maturity in business in Dubai with three current properties in operation (Fairmont The Palm, Fairmont Dubai, Raffles Dubai) and three hotels under development (Fairmont Ajman, Fairmont Fujairah and Swissôtel Dubai) set to open prior to the Expo 2020.

“We believe that those expectations [of growth] will mainly focus on the midscale hotels development and boutique hotels, especially with the launch of new projects like Mohammed Bin Rashid City, Dubai Design District.  Our three brands (Fairmont, Raffles and Swissôtel) are positioned on the upper upscale and the luxury segment,” said Baudin.

Article continues on next page ...

SEEKING SUPPORT
In order to grow their portfolios, hoteliers are seeking continued support from DTCM, as well as the development of more attractions for families.

Accor Middle East director of development Olivier Granet said: “From the point of view of a major international hotel operator such as Accor, we believe it is important to have a strong tourism-oriented governing body with a clear vision to support the growth of Dubai.

We also believe that it is important to maintain open and clear communication channels between DTCM, hotel operators, airlines and other regulatory authorities, in order to ensure transparency in the market.”

Wyndham Hotel Group’s Haddad said hoteliers would also benefit from more joint programming
with DTCM to increase visitor numbers.

“As a local authority, I think the biggest thing DTCM can do to help hoteliers is to design programmes and products to increase the number of travellers who visit the city when they transit through Dubai International Airport. When you see that Dubai’s airport had over 57 million passengers in 2012, there does seem to be an opportunity to convert transiting passengers to overnight guests. DTCM could be instrumental in this,” asserted Haddad.

In terms of infrastructure, Jumeirah’s Clayton said the “most obvious gap” was in the number of entertainment or theme park venues, but that finding talent to work across such a growth in supply would also be challenging.

“With the anticipated increase in hotel inventory across the country, we anticipate growing demand for both tertiary and vocational education and training.

The former is delivered through the Emirates Academy of Hospitality Management — and we hope there will be scope to open a vocational training college for the hospitality sector in the region, as the industry will need a greater supply of qualified and experienced hospitality professionals to meet the expected boom in demand for talent,” said Clayton.