One of the first blog entries was about Incentive Travel in Dubai. I described the explosive growth, the dramatic changes I had witnessed and some of the incredible destinations and experiences available for sales incentive trips. If you want economic news and analysis, turn on CNN or read the front pages and business sections of any of today’s newspapers. This excellent article about Dubai in the Observer is a great place to start. So is this Wall Street Journal update about Dubai’s financial outlook. Given recent events, I want to share a more personal, upfront and centre view of Dubai as I have seen its growth unfold over the past 9 years.
I am ashamed to admit it but, a few months before my first trip there, I had never heard of Dubai. It was the year 2000 and I was making travel plans for an executive workshop that I had been scheduled to facilitate in Mumbai. My travel agent said “You must see Dubai” and arranged a stopover for me on my way home from Mumbai.
The airport, which was filled with several floors of luxury boutiques was more like a large shopping centre than an airport. I was fortunate enough to travel business class on that trip. When we landed in Dubai, the business class lounge was like nothing I had ever seen. Passengers were checked in at a front desk and given a room, just like at a luxury hotel. In the lounge, there was a stream and palm trees. A scrumptious buffet awaited us. I had a very relaxing sleep before catching my flight to Mumbai the next morning.
Mumbai was depressing. There were signs of decay all around. Yet, I fell in love with the people. The cuisine was outstanding and the customer service standards exceptional. Still, the pollution and overcrowding were overwhelming and the grinding poverty for which Mumbai is known haunted me.
I have already written in my opening blog about the first time I saw Dubai. I’ve described how I was mesmerized by the way in which the city was lit up for Ramadan. In my opening blog, I re-lived the thrill of my first desert safari, horse riding in the desert, watching polo, and the enchanting view of the Dubai Heritag e Village during my first Dhow dinner cruise.
Fast forward to January, 2007. I was in Dubai to do a retreat for one of my clients. Dubai felt like a totally different place. I stayed at the Oasis Beach hotel. A HUGE high rise condo was under construction on the other side of the driveway. From my balcony, I could see the Palm Jumeirah taking shape. A few days earlier I had stayed at the Hyatt Regency overlooking the Palm Deira. Dubai’s growth was stretching out into the desert, across the sea and way up into the sky.
The former ruler of United Arab Emirates, His Highness Sheikh Zayed bin Sultan Al Nahyan Zayed, had been really forward thinking. Realizing that the oil would not last forever (and Dubai has far less oil than Abu Dhabi), he began to develop United Arab Emirates into a commercial centre and upscale tourism destination.
In 2007, I finally had a chance to tour Dubai’s heritage area and the original home of the former ruler at Dubai Heritage Village, the sights that had enchanted me 6 years earlier. It was NOTHING compared today’s Dubai palaces. I started to really get a sense of the growth and the transformation.
That’s why it’s so important when take your team to visit Dubai (or any destination for that matter) to make time to tour the heritage areas and place growth and development in context.
Luxury Real Estate: Build but will they Come?
His Highness Sheikh Mohammed bin Rashid Al Maktoum became the ruler of Dubai on January 4, 2006 after his brother Dubai ruler Sheikh Maktoum bin Rashid Al Maktoum passed away. He really ramped things up, taking Dubai on one of the biggest building sprees in history, literally transforming desert and beach into skyskapers, upscale resorts and condos.
Catering to an upscale market is consider to be a savvy, recession-proof strategy. It was supposed to work and, for a while, it seemed to be working.
The real estate business model seemed foolproof. Sell from plans then build. Many of the luxury condominiums were sold out and most of the commercial buildings fully rented before construction had even started.
“Taking advantage of cheap credit, developers — some run by the government and other’s closely linked to it — built soaring skyscrapers and luxury residential compounds on man-made islands at a pace that outstripped real demand. Despite oversupply, real estate prices soared, in a mirror image of what happened in the United States before the subprime mortgage crisis sent the world into its worst recession in over six decades.”
“Some multinational companies even made the emirate their regional headquarters, and company executives rubbed shoulders with Hollywood stars like Charlize Theron and athletes like Tiger Woods.”
As I drove along Sheikh Zayed Road counting the mega-highrises under construction (I stopped counting at 100), there were other disturbing questions. I remember thinking “Man, this is SO much so fast. How long can this continue? When will it stop. Nothing can keep going and going like this, bigger, taller, faster. It’s impossible. One day will I drive along here and see all of these buildings half completed because there wasn’t enough money to finish them?” Who knows why I had those thoughts. Everything seemed to be working. They came out of the blue. But, had Dubai’s ruler Sheikh Khalifa and Sheikh Mohammed bin Rashid Al Maktoum, the son of the former ruler whose return to Dubai coiincided with my first trip there, taken things toofar too fast?
A year and a half later, I was back in Dubai, working for a dream client that represented, the ultimate in luxury.
I facilitated the sophisticated team building simulation that I designed for that client at a beautiful resort overlooking the Jebel Ali Palm island development.
When I wasn’t working with the team, I was browsing the shoppes at Mall of the Emirates and Ibn Battuta Mall, self-described as:
“the world’s largest themed shopping mall is revolutionizing the retail and entertainment experience in Dubai.”
On that trip, I began to get a glimpse at the price of development. Behind the sparkling gold veneer, there were certain harsh realities concerning the conditions under which the “guest workers” from India, Pakistan and Banglaesh were forced to live. As I am originally from Jamaica, the expression “shanty town” came to mind. “Luxury at what price?” I wondered. It was a disturbing question.
Business class travel, limousine transfers between the airport and the resort, it was an incredible experience. Reminiscent of January, 2001, I thought “FINALLY, I’ve made it. I’m going to be rich”. That line of thinking should have been a warning sign for we all know what happened in February, 2001.
A year and a half later and BOOM, Lehman Brothers fell and the Wall Street meltdown. Then, in a domino effect, projects around the world including those in Dubai started to figuratively fall.
When the global financial crisis hit Dubai, prices collapsed by 50 percent in a year while the cheap funding dried up, meaning other projects either sat unfinished or were scrapped.
Fast foward to 2009, in the post Lehman brothers/Wall Street Meltdown era and 40% of Dubai’s office space is empty.
Luxury Tourism: A Recession-Proof Strategy
The second component of Dubai’s economic plan also seemed bulletproof. Cater to the recession proof upscale tourism market and you’ll always hit gold and strike it rich. But who could have predicted the AIG effect, an intense backlash that turned “luxury business travel” into a bad word? Now, consider this report from Market Watch:
Dubai tourism already defaulting: Economic downturn, overcapacity bite into once-hot travel destination
“With its massive residential, commercial and leisure developments built on oil revenue (and, as it turns out, a foundation of shaky debt), Dubai has been steadily modeling itself for more than a decade into an upscale tourist destination and a regional entrepot for those people and companies looking to do business in the Persian Gulf region.
By some measures, things have held together relatively well during the recession. Tourist arrivals to Dubai were up 5% through the first half of 2009, largely on the back of slashed hotel rates and an aggressive marketing campaign. Its Department of Tourism and Commerce Marketing said 3.85 million visitors came in the first half of the year. In contrast, 10 years ago Dubai had about 3 million visitors annually; 20 years ago, it was barely 600,000.
….a glut of new supply has dragged down average occupancy to less than 70% from the more than 87% experienced between January and June last year
Worse, revenue per available room, a key industry metric known as RevPAR, fell by 36% just last month, STR said, as rates were slashed. A cursory check of online-travel sites will turn up four- and even five-star hotel properties offering accommodations for as little as $100 a night. “
In recent days, there has been increasing anxiety about Dubai’s debt with Dubai World’s note coming due in mid-December. What lies ahead for Dubai World whose Palm Island Trilogy and Burj Dubai developments represent the ultimate in luxury and growth?
“In the past, the ruler was trusted on finances because everyone thought they were backed by oil,” said Simon Henderson, a Gulf and energy specialist at the Washington Institute for Near East Policy. “It will be different from now on.” MSNBC
As for Dubai’s strategy for growth, the events of the last 12 months have raised many questions. A lot of our thinking about luxury has had to change dramatically. Who could have predicted the “AIG effect” that would turn “luxury” into a bad word for corporations? One really sound strategy that used to stand organizations in good stead during recessions was catering to the luxury market. The impact has been huge.
I still love Dubai although it is not the same city with which I fell in love 9 years ago. I think there are some incredible experiences that can create truly memorable incentives and retreats for organizations.
I know when some people picture the Middle East they paint the whole region with 1 large brush stroke. It is important to remember that areas like Dubai, Abu Dhabi and Oman are vey stable and far way from the turmoil of the Gaza Strip. The crime rate is very low and you really don’t see the terrorism you see in some parts of the region. I acually feel safer there at night than I do in most large metropolitan cities in North America.
Dubai is just a piece of the larger global puzzle. If we think of “Dubai” as a brand, will its debt issues that are now splashed in headlines around the globe erode its brand equity as a luxury destination? In a way, the fear that many companies now have of being perceived to be conspicuous consumers of luxury has come back to bite Dubai and other luxury destinations. Yet, attracting the luxury incentive traveller will speed Dubai’s recovery.
So what happens now? When will things recover? I am sure many other people are asking the same questions. I wish I knew. Talk is that Dubai will be bailed out by its rich cousin Abu Dhabi. When will this happen? How will this happen? Only time will tell.
In the meantime, this is probably one of the best times to go to Dubai. Be sure to build in some time to also explore Abu Dhabi.
You’ll provide your team with an unforgettable experience of a lifetime. At a time when Dubai is facing some challenges, it can only help if companies take advantage of the specials that are now available and book retreats, sales rallies, conferences, and sales incentive trips for 2010 and 2011. There are unheard of bargains to be had and, in Dubai, luxury is finally affordable.
Let Executive Oasis International Take Your Team to Dubai, United Arab Emirates
Executive Oasis International would be pleased to build a customized itinerary in Dubai for your team based on your interests. We can also customize one of our own itineraries that give your group some down time and also a chance to really explore Dubai’s attractions, historical and cultural sites.
- Desert Survival: In Search of the Golden Camel
A business team building simulation with or without an overnight stay in the desert. Includes dune bashing, business exercises and cases, GPS/orienteering challenge, sunset picnic on the dunes, camel safari to a Bedouin camp, camel watering relay, traditional Arabian dinner enjoyed Bedouin style, option of overnight camping in traditional Bedouin tents, firestarter, and cooking challenge.
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