News Analysis: Dubai's Mall of the World

Hoteliers are already eyeing up opportunities at Dubai’s new mega mall, with a strong focus on mid-market and budget options

In July, Dubai Holding announced the UAE’s latest mega-project in Dubai, Mall of the World; described by the company as a “temperature-controlled pedestrian city” and encompassing retail, entertainment and wellness facilities.

The announcement grabbed the attention of media around the world, putting it on a par with the likes of Burj Khalifa and Palm Jumeirah in terms of its ‘wow’ effect.

For hoteliers, however, the real interest lies in the fact that the development is set to feature 80 hotels and 20 serviced apartment buildings, with a total of 20,000 rooms.

As Dubai Holding CEO Ahmad Bin Byat explained to Hotelier Middle East, the vision for the hotel element, which will be a focus of the first phase, is that it encompasses a broad range of options for visitors.

“We don’t yet have a breakdown of each category; however, we are keen that the facilities available at Mall of the World cater to a wide range of tourists, from travellers seeking exclusive luxury and boutique options, to mid-range and budget hospitality,” he said.

“This comes as part of the government’s vision to increase the range of mid-market hotels and to provide options suitable for all types of tourists. As a long-term investor aligned with the government’s vision, we are looking to build capacity for the future.”

That willingness to seek out a broad range of options will certainly be music to the ears of the likes of Premier Inn. Its managing director in the Middle East, Darroch Crawford, is making no secret about his enthusiasm for the project.

“This is exactly the kind of development we would wish to be involved in, and in a significant way,” he explained.

“This amazing development will attract visitors from all over the globe and a high proportion of these will be seeking accommodation that offers great service, but value for money.

“Visitors will want to spend their money on the shopping and attractions, not necessarily on high-end hotels.”

Meanwhile, for an operator like Wyndham, with a wide range of brands in its portfolio, Mall of the World is likely to provide multiple opportunities.

“We would love to add to our existing pipeline of upscale Wyndham Hotels and Resorts properties and cater to the demand for midscale hotels with our Ramada and TRYP by Wyndham brands and for long stay guests with our extended stay brand Hawthorn Suites by Wyndham,” said Wyndham Hotel Group regional vice president MEA Bani Haddad.

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“Ideally, such a development should also be supported by budget brands such as the Ramada Encore tier and Days Inn but we will have to see the land prices and evaluate the financial viability of such products.”

Similarly, Carlson Rezidor director business development MEA Elie Milky is assessing his company’s options across a broad range of brands.

“There is a phenomenal opportunity for our midscale, real estate efficient Park Inn by Radisson; the recently launched lifestyle select Radisson Red; and our core, contemporary Radisson Blu brands,” he said. “We would also consider a Quorvus Collection hotel and serviced apartments to provide a unique, luxury product in the upper tiers of the market.”

One operator, which will almost certainly have a big presence at the development is likely to be Jumeirah Group. CEO Gerald Lawless told Hotelier: “Jumeirah, as the major hotel brand of Dubai and a member of Dubai Holding, will work closely with its parent company to understand future opportunities within Mall of the World.”

And even Dubai Holding CEO Ahmad Bin Byat was happy to admit the same: “We are confident that this project will appeal to different hotel operators and we welcome all to contact us.

“Obviously, we are planning to use our own capabilities as well. Jumeirah is a leading luxury hotel operator and both TECOM and Dubai Properties have successful experience in managing mid-market hotels.”

However, as Filippo Sona, head of hotels for MENA at Colliers points out, Dubai Holding will want to make sure it doesn’t undermine its own operations, which lie in close proximity to the development.

“If you are a retailer and you are going to put your brand in Madinat Souk, and suddenly across the road you’ve got the biggest venue in the world, which is going to get the attention of the world media, what will that do? That may dilute business.”

And there are the inevitable concerns about healthy occupancy and room rates being dented by a sudden mass of hotels in one location.

As ratings agency Moody’s points out in its latest report on Emaar Properties, the balance between supply and demand could tip in the wrong direction.

“There is a risk that the company embarks on a significant multi-year capital spending plan in the current market up-cycle at a time when competitors are increasingly becoming active, which could create overcapacity,” said Rehan Akbar, Moody’s analyst and author of the report.

With that potential oversupply in mind, Haddad said he will be taking a conservative approach.

“We look at this as an initial plan, which may be adjusted as it develops. We do not see property investors or ourselves venturing into an area where the demand and the yields are not up to the market expectations.”