Comment: Time to tone down 2020 noise?
Everyone is getting terribly excited about that mega event looming on the horizon in Dubai’s calendar: the World Expo 2020. It’s understandable, when you review the headline figures.
The Expo will last for six months, from October 20 2020 to April 10 2021. The Dubai government is expecting 25 million visitors during this period, in addition to the 20 million hotel guests it is already targeting by that year, regardless of the Expo.
The 150-hectare Expo site forms part of the 140km² Dubai World Central (Maktoum International Airport) ‘aerotropolis’, a project that has received a major shot in the arm thanks to the Expo win.
Sheikh Mohammed has signed off on plans to build the largest airport in the world there, with a capacity of 200 million passengers a year, while it is hoped that DWC’s huge residential district near the Expo site will also be largely completed by 2020.
The government has said 100 new hotels will be built to serve the extra demand, and I can confirm from my own company’s research that developers have already committed to this number. A new metro line will be constructed to serve DWC and the Expo site, while developer Meraas has announced three new theme park projects nearby.
Soon after Dubai won the Expo 2020 in November 2013, house prices shot up as far away as Ras Al Khaimah in expectation of the massive boost to the economy. A year on, many of us are still standing on the shoreline, waiting for a tsunami of bounty that has apparently not yet arrived.
The house rents and sale prices have fallen back again, thank goodness, because for many of those who are waiting for new business to ‘trickle down’, times are still surprisingly tough for an ostensibly booming economy.
I have been meeting a number of Dubai-based hotel GMs in my work recently, who report softening room rates and an increasing polarisation of the city’s sub-markets.
Outlying hotels that used to get overflow demand from the downtown areas during the summer in previous years, got none this year. There are concerns about recent increases in the rooms supply, let alone the huge future pipeline. They comment that the government has released few concrete details about its Expo plans, and the hoards of expected contractors and consultants have yet to materialise.
The reality seems to be that there are two mindsets existing simultaneously. On the one hand, there is real optimism about the future. On the other hand, attitudes to project spending changed irrevocably during the global financial crisis, and investors will not rush into things with blind faith as they did in the 2002-2008 construction boom.
In the meantime, even in the more optimistic investment climate, many developers are working out how to cut their losses on projects brought to a halt by the crash. I am aware of several hotel-related projects that are now being revived only in the sense that they are finally being packaged up to be sold on to other developers. Many other pre-crash projects remain either dormant or dead, with little hope of resuscitation.
In short, there are both survivors and victims of the global financial crisis. Some will never be able to exploit the opportunities that the future holds, while others will probably have to wait until nearer 2020 to get a piece of the action.
I am confident that Dubai will be in overdrive from 2018 to 2020, and hope to be around when that happens.
About the Author: Guy Wilkinson is a director of Viability, a hospitality and property consulting firm in Dubai. For more information, e-mail: guy@viability.ae