2013 Year in Review – BUSINESS

The UAE’s status as the region’s leading meetings, incentives, conferences and exhibitions (Mice) hub has played a key role in boosting visitor numbers and economic growth.



Major business events held during 2013 such as Dubai Airshow, Gitex Shopper, Gulfood, Arabian Travel Market, Cityscape Global, Middle East Watch and Jewellery Show, World Future Energy Summit, Dubai International Motor Show, Perfect wedding show, Dubai International Boat Show, The Big 5 – International Building & Construction Show, Indian Property Show, Made-in-UAE Exhibitions, Sial Middle East show, Dubai International Jewellery Week, Index International Design Exhibition, among others, gave a glimpse of the country’s economic growth. The Dubai World Trade Centre, Abu Dhabi National Exhibition Centre and Expo Centre Sharjah are central in promoting the Mice industry in the UAE.


Economy: Growth momentum looks set to pick up

Economy on an upward trajectory spurred by non-oil sector investments, the trade and services sector, and the booming tourism industry

The UAE, the Arab world’s second largest economy, is set to finish 2013 at 4.5 per cent growth, at a pace faster than the forecast made by the International Monetary Fund, and pick up added momentum in 2014 on the back of a host of factors that have never been so promisingly buoyant and specifically growth-oriented.

The much acclaimed Expo 2020 win by Dubai and the imminent prospect of an upgrade to the coveted emerging market status will add dynamism to the economy that is already on an upward trajectory, spurred by three critical sectors: huge non-oil sector investments, the buoyant trade and services sector, and the booming tourism industry.

The much acclaimed Expo 2020 win by Dubai and the imminent prospect of an upgrade to the coveted emerging market status will add dynamism to the economy. — KT photo by Leslie PableoThe UAE Minister of Economy Sultan bin Saeed Al Mansouri echoed the upbeat sentiment as he projected that the country’s gross domestic product (GDP) would grow between four and 4.5 per cent in 2013. Al Mansouri has argued that despite the IMF’s predictions of weaker global oil prices in 2014, the UAE’s economy would surge ahead. Oil price impact on the economy will be limited as oil accounts for 30-33 per cent of the country’s GDP. The UAE has already set into motion a strategy to further reduce the dependence on oil to 10 per cent in future, the minister pointed out.

“In keeping with its Vision 2021, which seeks to make the UAE one of the best countries in the world by 2021, the UAE remains committed to its ongoing development and diversification of its economy,” said Al Mansouri.

The Ministry of Economy said in a report that the UAE’s economy has grown exponentially by nearly 231 times since the union was set up by seven emirates in 1971 and the growth catapulted the country to emerge as the second largest Arab economy after Saudi Arabia.

From Dh6.5 billion in 1971, the UAE’s GDP is expected to hit an all time high of Dh1.45 trillion in 2013. The ministry report projected that the UAE’s real GDP would grow by around 4-4.5 per cent this year, far higher than the rate recorded over the past five years of 2.3-3.5 per cent. The country’s non-oil trade surged by around 28 times over a period of 32 years to reach Dh1.2 trillion in 2012 compared with nearly Dh41 billion in 1981, the report said.

According to the Arab League, the surge in trade turned the UAE into the largest consumer market in the region after it overtook Saudi Arabia in imports. Imports of goods and services totalled $273.5 billion in 2012, the highest volume in the Arab world, accounting for almost 27 per cent of the region’s total trade of goods and services of around $1.022 trillion, according to the Inter-Arab Investment Guarantee Corporation (IAIGC).

In exports, the UAE came second, with about $314 billion, while it also was ranked second in terms of total trade of goods and services, handling nearly $588.5 billion. In 2012, the UAE was ranked third in the Arab world by GDP per capita, which stood at $45,731, according to the Washington-based Institute for International Finance.

Shaikh Abdullah bin Zayed Al Nahyan, Foreign Minister of the UAE, recently said that political stability, economic growth and a balanced foreign policy were key incentives luring world’s leading businesses to the UAE. Shaikh Abdullah said that the Expo 2020 win underlined the world’s confidence in the UAE, which is ranked 33rd globally in the Ease of Doing Business survey.

The UAE, which is seeking to enhance its economic competitiveness by diversifying its resources and by building a knowledge-based economy, also advanced five positions in economic competitiveness in the Global Competitiveness Report for 2013-2014 — from 24th in 2012 to the 19th in 2013. Shaikh Abdullah predicted that driven by research and development, the UAE would emerge as a regional hub for smart economy in the region. The UAE was ranked 23rd globally in the World Bank’s Ease of Doing Business report 2014. The UAE was ranked fourth globally in the Trading Across Borders category, up from its fifth ranking in 2013.

Standard Chartered, predicting a better 2014 across the world with the global economy picking up steam to rise to 3.5 per cent from 2.7 this year, and “inflation staying benign,” estimated that non-oil project spending in Abu Dhabi would reach $34 billion in 2014 in line with the emirate’s long-term development and diversification goals. The Dubai government’s Statistics Department said that the emirate’s economy is headed for the fastest expansion in six years as it benefits from an increase in hotel occupancy and manufacturing. Gross domestic product grew 4.9 per cent in the first half, compared with a 4.4 per cent increase in 2012.

Dubai’s real GDP grew to Dh169 billion in the first half of 2013 from Dh161 billion in the first half of 2012. In the backdrop of a rebounding Dubai economy, a key driver of the non-oil growth of the Emirates, the IMF is also expected to raise its economic growth forecasts for the UAE this year. The fund in September predicted GDP growth of four per cent.

Masood Ahmed, IMF’s director for the Middle East and Central Asia Department, said that Dubai’s rebounding property market, combined with a strong performance in trade, manufacturing, transport, and finance, had lifted its GDP to more than four per cent in the first half of 2013. “I’m sure this will feed through into the end of year numbers for the UAE as a whole and will end up being revised upwards.”

Analysts at Knight Frank observed that Dubai is recovering from a 65 per cent decline in property prices. Dubai’s booming economic scenario has been underscored by the emirate’s stock market, where shares listed on the Dubai Financial Market General Index have surged more than 90 per cent this year.

The second key driver of Dubai’s growth is its core trade and services sector that would continue benefiting from strong regional dynamics, “as bulging GCC fiscal surpluses drive long-term infrastructure and diversification projects,” Standard Chartered said in the Global Focus 2014 report.

In 2013, Dubai’s non-oil trade, which was up 16 per cent ($184 billion) in the first half, will end up almost 14-16 per cent higher than in 2012. “For 2014 we expect overall trade to grow 12-15 per cent. Driving this growth will be Dubai’s position as a gateway to 55 per cent of trade inflows to the GCC through its ports.” The bank expects investment levels in the region to remain strong, driving demand for capital goods imports and benefiting the emirate’s logistics and trade sectors.

Dubai’s tourism sector, the third key growth driver, is likely to have another strong year. “Hotel occupancy rates and tourist inflows to Dubai are very strong. In the first half of 2013, the number of tourists in Dubai reached 5.5 million, an 11 per cent increase over 2012. Dubai’s hotels reported 7.9 million visitors in the first nine months of 2013, up 9.8 per cent versus the same period in 2012.”

Dubai has total of 81,492 hotel rooms as of the first half 2013, which means the growth in occupancy is impressive: room stock in Dubai was almost 43,419 in 2009, when occupancy rates were around 68.8 per cent. — issacjohn@khaleejtimes.com


Hospitality: Exponential growth ahead

Dubai’s successful Expo 2020 bid to boost the UAE’s hospitality sector in years ahead.

The UAE’s thriving hospitality industry, enjoying an impressive track record for its consistently high occupancy rates and sustained capacity expansion drive, is set for a new phase of exponential growth that is expected to catapult the Emirates to the ranks of the world’s most sought-after destinations for international visitors by 2020, when Dubai will be hosting the World Expo.

The UAE is already among the top five countries in the world for new hotel openings over the past five years. The hospitality industry in the UAE saw positive growth throughout the first 11 months of 2013. The UAE also has the longest pipeline of rooms under construction with an additional 32,107 rooms in the offing while the Middle East/Africa hotel development pipeline comprises 483 hotels totaling 117,450 rooms.

Dubai is the world’s biggest growing market outside of China since 2008 in terms of new hotel openings. — KT photos by Grace GuinoMassive-scale expansion of international airports in the UAE, including what promises to be world’s largest — Al Maktoum International with a capacity for 160 million annual passengers — and the fast pace of growth being recorded by the country’s three industry-leading airlines have already been driving a relentless surge in the number of international visitors and holidaymakers to the UAE. As a result, almost all hotels across the UAE have been reporting impressive occupancy rates as well as steady growth in average daily rate, or ADR.

A report by STR Global on hospitality supply growth around the world reveals that only the US, China, the UK and India are ahead of the UAE. According to a forecast by Alpen Capital, hotel room supply in the UAE from 2012-2016 will increase by 5.3 per cent annually, taking the number from the current 96,992 hotel rooms to 125,383 rooms by 2016 in tandem with a surge in the influx of tourists.

Dubai, the regional hub for hospitality, tourism and shopping, is the world’s biggest growing market outside of China since 2008 in terms of new hotel openings. The city has been named a top 10 global destination for business, leisure and shopping tourists, in a research exercise by Genesis Consulting ME. Hotels in Dubai exceeded the regional and national average and recorded a 9.9 per cent growth in ADR to $290.68.

According to a report by STR Global, in November, hotels in the region recorded an average 64.6 per cent occupancy at $180.88 ADR, resulting in $116.78 revenue per available room (RevPAR). These represented a dip in occupancy of 1.7 per cent, an increase of 6.8 per cent in ADR and an overall 4.9 per cent rise in RevPAR. During the first nine months, Dubai hotels witnessed significant growth in revenues, with total revenues up by 17.1 per cent, reaching Dh15.33 billion. Total guest nights also recorded similarly impressive rises, up 13.7 per cent to 30,874,916 from 27,163,974 in the first nine months of 2012.

EC Harris, the global consultancy, said that more than 10,000 five-star hotel rooms in Dubai are now in need of refurbishment. It estimates that there were 23,500 five star rooms in Dubai in 2012. However, this number has grown significantly throughout the last 18 months as operators launch new properties to meet growing demand and cash in on lucrative room rates.

The Construction Pipeline Report released by STR Global predicts that Dubai’s hotel room capacity will grow 28.6 per cent in 2013 with 17,409 rooms in the pipeline. Dubai has also been named a top 10 global destination for business, leisure and shopping tourists in a research exercise by Genesis Consulting ME. Alpen Capital said with tourist arrivals in the UAE likely to grow at a compound annual growth rate of 5.3 per cent between 2012 and 2022, hotel supply is expected to increase at 5.3 per cent from 96,992 hotels in Dubai and Abu Dhabi to 125,383 hotels in 2016.

Dubai’s hospitality industry has received a new fillip with a move to license holiday homes. His Highness Shaikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, issued a decree to help develop the tourism industry by increasing the range of accommodation available to visitors — with the sector currently bursting at the seams. There are currently 100 per cent occupancy rates at hotels during the peak season. The decree states that the Dubai Department of Tourism and Commerce Marketing (DTCM) will have the authority to grant licences to those wishing to rent out furnished residential properties on a daily, weekly or monthly basis, according to the Dubai Media Office.

DTCM director-general Helal Saeed Almarri said regulating the rental of private properties as holiday homes would have a considerable positive impact on both tourism and real estate. The DTCM will define the requisite standards for the holiday homes that will be classified as either ‘standard’ or ‘deluxe.’ Almarri said in order to achieve Dubai’s headline objective of 20 million visitors per year by 2020, there is a need to both increase the overall stock of hotel rooms in Dubai and widen the range of options for visitors.

“In recent years the number of three and four star establishments has increased, but it’s vital that we continue to engineer the growth of this range,” he said.

Saudi Arabia, India, the UK, USA, Russia, Kuwait, Germany, Oman, China and Iran made up the top 10 source markets for January to September 2013, mostly unchanged compared to 2012. A number of hotel properties are either under construction or in the planning stages in Dubai. Investors in new hotels will be granted a waiver on the fee for a period of four years from the date the permit to construct is granted and provided that this date is between October 1, 2013 and December 31, 2017.

“While our Tourism Vision has an end date of 2020, our strategy is focused on continual growth year-on-year, and we want to see the destination offer noticeably broaden every year. The equation is simple - the sooner the property opens, the bigger financial incentive the hotel owner will receive,” said Almarri.

Standard and Chartered said the Expo 2020 would have positive implications on three key parts of the economy: housing, infrastructure and hospitality. On the hospitality front, the authorities estimate that 25 million people are likely to visit the Expo, of which 70 per cent will come from outside the UAE. However, one key challenge for Dubai is to maintain tourist inflows afterwards to prevent an oversupplied hospitality sector.

“We see the hotel sector as one of the main beneficiaries of growth generated by the event. To accommodate the significant inflow of tourists, the hotel stock will have to expand. Since 70 per cent of the 25 million visitors are expected to come from outside the UAE, Dubai will need to accommodate 17.5 million tourists in the months around the Expo,” it said.

Dubai will require around $43 billion to significantly upgrade its infrastructure for Expo 2020 that may generate additional revenues in the range of $25-35 billion, studies show.

Deutsche Bank said a bulk of the $43 billion spending would go into expanding the hotel and leisure industry, while around $10 billion will be spent to improve transportation infrastructure. The Al Maktoum International Airport, the newly developed airport near the Expo site, when fully completed will be able to handle 12 million tonnes of cargo and 160 million passengers annually, making it the largest international airport by some margin. Dubai has also initiated an expansion plan for its existing Dubai International Airport to increase its existing capacity from 60 million to 90 million passengers per year by 2018.

Habib Khan, GM of Arabian Courtyard and CEO of Planet Group, said his group would record a year-end occupancy of 86 per cent this year, compared to 82 per cent in 2012.

“Expo 2020 will definitely help us shift our business mix to higher spending business travellers over the years while maintain a decent occupancy at an improved ADR in a passage of time. We will be closing the year 2013 with ADR of Dh525 and for 2014 we are projecting the ADR of Dh595.

Moussa El Hayek, COO of Al Bustan Centre & Residence, said 2013 set a new record for his hotel as it achieved year-round occupancy of 85 per cent which is 12 per cent more than 2012. “All indications support the view that 2014 will be another year of growth for Dubai’s hospitality industry.”

Ayman Ashor, GM of Tilal Liwa Hotel, said his hotel has managed to exceed by two point in total occupancy in 2013 compared to 2012. Expo 2020 will have a big positive impact on business trends in the coming year. Benefits shall not be only limited to Dubai. It will also be felt across other emirates, he said.

Samir Arora, general manager of Ramada Downtown, said activities related to Expo 2020 would only start in the next couple of years and will not have an immediate effect in 2014. However, Dubai as a destination will continue to evolve due to Emirates Airlines which continues to add new aircraft every month and fly to newer destinations.

Iftikhar Hamdani, GM of Ramada Hotel and Suites Ajman, said the demand for 2014 would be more than 2013.

“Without extending the inventory, we will not be able to cater to this demand. We need to increase at least 200 more rooms in Ajman due to this high demand.” - issacjohn@khaleejtimes.com


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