Evolution of Dubai's Hotel Market

www.viability.ae…when diligence is due
The Evolution of Dubai’s Hotel Market
22/01/15, Sharq Village & Spa, Doha, Qatar. Presenter: Guy Wilkinson
Dubai
holds the
Guinness
World
Record
for the
highest
ever
ﬁrework
display

Viability Management Consultants
•  Hospitality and real estate development consultancy
•  Established in Dubai in 2006
•  Principals have consulted in every country in the Middle East
except Iraq, as well as many in Africa
•  Specialized in providing:
–  Bankable feasibility studies
–  Market studies in a variety of hospitality-related sectors
–  Operator selection and contract negotiations
–  Operational reviews and interim management solutions
•  Reputation for high-quality, detailed, realistic advice
“Truly an expert consulting company.”
“…a most valuable contribution to our knowledge base.”
“All responses from Viability were exceptionally prompt and pertinent.”

Consulting Services
•  Market & financial feasibility studies
•  Market & financial ‘highest & best use’ studies
•  Market & financial pre-feasibility studies
•  Market studies
•  Operator selection
•  Management contract negotiations
•  Business valuations
•  Operational reviews
•  Interim management
•  Broking
Real Estate Sectors
•  Hotels & resorts
•  Serviced apartments & villas
•  Timeshare, fractional, condo suites/apartments
•  Residential apartments, villas, townhouses
•  Commercial offices
•  Shopping centres
•  Leisure & entertainment centres/attractions
•  Food & beverage outlets, health clubs, spas, etc
The Address Downtown Dubai
(feasibility study by Guy Wilkinson)

Amazing Dubai, City of Records!
•  Dubai holds the Guinness World record for staging the largest ever
ﬁrework display on New Year’s Eve in 2014, with 400,000 ﬁreworks
being launched during a 6-minute show on The Palm and The World

More Dubai Record Trivia!
•  At 828 metres and 163 storeys, the Burj Khalifa
is the world’s tallest man-made structure on
land, with the ‘highest restaurant’ and the
highest base jumping record
•  Dubai boasts the 5 tallest hotels in the world:
1) the JW Marquis (355 m), 2) the Rose
Rayhaan (333 m), 3) the Burj Al Arab (321 m),
4) the Jumeirah Emirates Towers (309 m) and
5) The Address Downtown Dubai (306 m)
•  The 306 m, 80-storey Cayan Tower in Dubai
Marina is the world’s tallest building with a
twist of 90o
•  Dubai Mall is the most visited shopping centre
in the world with 75 million visitors in 2013
•  Dubai Metro is the world’s longest driverless
metro with 2 lines and 75 km of track
•  The Dubai World Cup is the world’s richest
horse race, with a purse of US$ 10 million
JW Marquis Hotel Dubai

Before & After: Dubai Creek (Al Ras) in 1950s and Now

Before & After: Dubai Clock Tower in 1960s and Now

Before & After: Dubai International Airport in 1970s & Now

Before & After: Sheikh Zayed Road in 1980s and Now

Google Earth Images of Dubai – 2005 (top) vs 2015

Dubai’s History:
from ‘Back-water’
to Global Metropolis

3000 BC
Nomadic
cattle
herding
3rd Century
Sassanid
Empire, date
palm
cultivation
7th Century
Ummayad
trading post
1500s
Pearling &
ﬁshing
centre
1799
Bani Yas
dependency
1820
General
Maritime
Peace
Treaty w/
Britain
1833
Maktoum
dynasty
begins
Dubai Timeline 1 – Early History

1853
Trucial States
established
1892
British
Protectorate
1894
British
tax-free
entrepot
1903
British
steam
ship
port
1912
Sheikh Saeed
accedes
1958
Sheikh
Rashid
accedes,
DNATA
launched
1963
Dredging
the
Creek
Dubai Timeline 2 – Trucial States Era

1966
Oil
discovery
1969
First oil
shipment
1971
UAE
formed
1973
Dirham
introduced
1979
Jebel Ali
Port &
Free Zone
opened
1985
Emirates
Airline
launched
1989
Dubai
Commerce &
Tourism
Promotion
Board formed
Dubai Timeline 3 – The Oil Era

1990
Sheikh
Maktoum
accedes, First
Gulf War
1997
DCTPB
becomes
Department
of Tourism &
Commerce
Marketing
2002
First freehold
for foreigners
zone launched
(Dubai Marina)
2003
Dubailand
launched
2006
First houses
on The Palm,
Jumeirah
occupied
2006
Sheikh
Mohammed
accedes
Dubai Timeline 4 – The Real Estate Revolution

2008
Global
Recession,
Dubai Mall
and Atlantis
opened
2009
Dubai Metro
Red Line
inaugurated
2010
Burj Khalifa
inaugurated
2014
DXB overtakes
Heathrow as
world’s busiest
passenger hub
2015
Dubai World
restructures
its US$14.6
billion debt
2020
Dubai to
host
World Expo
Dubai Timeline 5 – Into the Future

Enlightened Leadership
•  Seeds of ‘Dubai Inc’ sown in early 19th century
(anticipating modern semi-state companies
like Emirates, Emaar, Jumeirah, etc)
•  Sheikhs Maktoum and Mohammed expanding
on the vision of their father, Sheikh Rashid
•  UAE federal structure allows much autonomy
for 7 Emirates
•  Old-fashioned monarchy avoids many of the
hassles and pitfalls of democracy, e.g., nobody
objects to planning permission!
•  Careful balancing act between traditional
eastern and modern western values, including
sagacious ‘blind eye’
•  ‘Charmed life’ in conﬂict zone thanks to
moderate stance and clever behind-the-scenes
diplomacy and security

Strong Economic Base
•  Trading history dates back to ancient times, but especially 19th century
•  Strategic location near Iran and India, in ‘centre’ of globe
•  Free zone initiative launched in 1985 with JAFZA (now home to 7,500
companies, inc 150 of Fortune 500), followed by >20 others including:
–  Dubai Internet City
–  Dubai Media City
–  Knowledge Village
–  Dubai International Financial Centre
–  Dubai Silicon Oasis
–  Dubai Multi Commodities Centre
–  Dubai Maritime City
–  Dubai Textile City
–  Dubai Flower Centre
–  Gold & Diamond Park
–  Dragonmart
•  Why do they work when other countries have failed?
–  Effective government investment to ‘prime the pump’
–  Excellent international promotion (e.g., through DTCM)
–  Full commitment to ensure beneﬁts – no tax or duties, 100% ownership
for foreigners (no sponsor), no restrictions on repatriation of proﬁts, etc
–  Safe haven appeal for investors from unstable neighbouring countries
Dubai Internet City

The Iranian Connection
•  Links with Iran date
back to Sassanid empire
in 3rd century
•  Strong ties especially
with Bandar Lengeh,
Bastak and Hormozgan
Province on southern
Iranian coast
•  Bastakiyah wind towers
brought by Bastakian
traders
•  Al Futtaim, Galadari, Al
Habtoor, Al Gurg and
other top Dubai trading
families are of Iranian
descent
•  Other historic links of
local population with
Yemen, Baluchistan,
Zanzibar
Wind tower house in Bastakiyah, Dubai

Real Estate Revolution
•  Pre 2002: Traditional pattern of business and
property ownership exclusively by UAE nationals:
–  51% sponsor ownership system for companies
–  Expatriate housing for rent only
•  2002: Creation of special zones in which foreigners
could buy houses “freehold” (or 99-year lease)
•  A logical extension of the free zone concept
•  Sales combined with residence visas (not any
more) and mortgages
•  Key freehold-for-foreigners zones include:
–  Dubai Marina, inc Jumeirah Beach Residence
–  Jumeirah Lake Towers
–  The Palm, Jumeirah
–  TECOM
–  ‘New Dubai’ (Emirates Hills, The Meadows, The
Springs, The Lakes, Jumeirah Islands, etc)
–  Downtown/Business Bay
–  Dubai International Financial Centre
–  International City
–  Discovery Gardens
•  Boom, bust and market recovery
•  Speculators vs. end users
•  Hot(el) real estate (condo suites and apartments)
Jumeirah Islands

Dubai Airlines
•  Abu Dhabi and
Oman were joint
owners of Gulf Air
from 1973 to 2006,
when Bahrain
bought them out
•  Key facts about
Emirates airline:
–  Established 1985
–  Owned by Sheikh
Mohammed and
managed by
Sheikh Ahmed
–  Flying 232 aircraft to 147 destinations in 80 countries
–  In 2013-14, Emirates flew 44.5 million passengers (= World’s No 4 carrier) and
2.3 million tonnes of cargo
–  Operates all flights to/from Terminal 3 at DXB
–  In 2013, Emirates made history by ordering 150 Boeing 777X and 50 Airbus
A380 costing US$166 billion
•  Launched in 2008, low-cost airline flydubai now flies 30 brand new Boeing
737-800 Next Generation aircraft to >85 destinations from DXB Terminal 2
•  In 2014, the airline ordered 75 Boeing 737 MAX 8s and 11 Boeing 737-800
aircraft, along with the purchase rights for 25 more Boeing 737 MAX aircraft, at
an estimated costs of US$8.8 billion
flydubai safety video featuring Freej cartoon characters

Dubai Airports 1: Dubai International Airport (DXB)
•  Base for Emirates and ﬂydubai, secondary hub for Qantas
•  In 2014, handled >7,000 weekly ﬂights operated by 140 airlines to >250
destinations
•  Was the world’s 7th busiest passenger hub in 2013, with 66.4 million
passenger movements
•  Overtook London Heathrow in 2014 as the world’s busiest airport for
international passenger traffic with 68.9 million passengers compared with
67.8 million at Heathrow (Airports Council International data, 12/14)
•  Airport ground handler, Dubai National Air Travel Agency (DNATA), which
began in 1959 with 2 staff, now has 17,500 and just opened the Dnata City at
Heathrow, with 60 trucks

A Decade of Passenger Movements Growth at DXB
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Departures Arrivals Transit
CAGR for all passenger movements = 13% per year
(21.7m in 2004 to 66.4m in 2013)
000s

Dubai Airports 2: Maktoum International Airport (DWC)
•  Main component of 140 km2 the Dubai World Central ‘aerotropolis’, a multi-use
real estate development
•  Currently operates freight and passenger services from one runway, one
passenger terminal and one cargo terminal
•  Construction is now underway to convert DWC into the world’s largest airport
•  The US$32 billion project will create 5 runways, 200 aircraft stands for wide
bodied aircraft, 4 concourses connected via 6 airport trains to 2 terminals, which
in turn will be linked to the city’s metro network
•  When complete, the mega-hub will have total annual capacity exceeding 200
million passengers and 12 million tonnes of freight
•  DWC home to the future 2020 World Expo site

Other Infrastructure
•  E11 Sheikh Zayed Road now
12 lanes in Dubai
•  E44 Al Khail, E311 and E611
ring roads have relieved
congestion
•  40 more km of main metro
network under planning,
linking Expo site
•  Dedicated Palm Monorail
•  New tram network just
launched in Dubai Marina/
TECOM
•  1,200 km Etihad Rail main
line will link the 7 Emirates,
eventually to GCC
•  Dubai Logistics Corridor at
Jebel Ali to become in-
bond air-sea-road-rail hub
linking JAFZA with DWC
Sheikh Zayed Road

Dubai Logistics Corridor

Tourism
•  “East meets West” with ‘safe’ version for each of the other
•  Sun and sand, shopping and night life, English speaking city
•  Hotels and malls as tourism attractions
•  DTCPB’s conversion to DTCM in 1997 ensures global ‘top of mind’
awareness (working with Emirates airlines)
•  Events boost visitor numbers and iron out seasonality:
–  Dubai Shopping Festival (January, +/- 4.5 million visitors)
–  Dubai Summer Surprises (similar concept and visitor numbers)
–  Ramadan Festival
•  Dubai World Trade Centre is Gulf exhibitions capital (>100 shows/year)
•  Cooperation with Oman offers city excitement, rural pleasures
•  Skiing in the desert! Ski Dubai at the Mall of the Emirates

PR Machine (usually involves tall buildings!)
Roger Federer serves on
the Burj Al Arab helipad
Tom Cruise scales the Burj Khalifa
during the ﬁlming of Mission
Impossible Ghost Protocol

Copycat Travel Destinations: Key Facts
City/Country Abu Dhabi, UAE Doha, Qatar
Airport Abu Dhabi International Airport Hamad International Airport
Passenger Throughput 2013 16.5 million 23.2 million
Future Capacity after Expansion 30 million 50 million
Airline Etihad Airways Qatar Airways
Total Aircraft 105 146
Total Destinations Served 110 146
Airline Passengers 2013 11.5 million 22 million
Tourist Board Abu Dhabi Tourism & Culture Authority Qatar Tourism Authority

Copycat Airports
The future Midﬁeld Terminal at
Abu Dhabi International Airport
Hamad International
Airport, recently opened

Dubai Hotel Supply Growth

Dubai Hotel Rooms Supply Growth

Dubai Hotel Apartment Building Supply Growth

Dubai Hotel Apartment Unit Supply Growth

Dubai Hotel Districts

Letting Unit Distribution by District, 2014
Rooms
Apartments

Brand Penetration in Dubai Hotel Rooms by District, 2014
Actual Numbers % of Totals

1960s
Owner-
operated
hotels in
Deira, Bur
Dubai
1970s
First
international
chain hotels
1980s &
1990s
Proliferation of
international &
regional chain
hotels
1990s
SZR district,
Jumeirah
beach
‘Riviera’,
branded hotel
apartments
2000s
Limited service
& condo hotels,
The Palm,
Downtown, Al
Barsha districts
2010s
‘Mega’ &
lifestyle
hotels,
‘B&Bs’
50+ Years of Hotel Development in Dubai

The First Hotels – Airlines Hotel (1958) & Ambassador (1968)

A Classic Deira Luxury Hotel – Radisson Blu
(former Intercon, 1975)

New Intercon & Crowne Plaza, Dubai Festival City (2007)

Classic Deira Luxury Hotels – Hyatt Regency (1980)

Park Hyatt (2005) Dubai
Creek
Golf
Club

Grand Hyatt, Bur Dubai (2003)

Raffles Hotel Dubai, Waﬁ City (2007)

Iconic Sheikh Zayed Road Tower Hotels –
Jumeirah Emirates Towers (2000)

More Iconic SZR Tower Hotels
L to R: Dusit Thani (2001),
Conrad (2013), Fairmont
(2001), Shangri-La (2003)

Downtown Hotels – Armani (2010)

Downtown Hotels - The Address Downtown (2008),
Dubai Mall (2009) & The Palace – The Old Town (2007)

Old Town Island, Downtown

Vida Downtown Dubai (2006)

JW Marriott Marquis Dubai (2012)

Gloria (2010) & Gloria Yassat Hotels (2012)

Kempinski Mall of the Emirates (2006)

Jumeirah Beach Hotel
(1997), Burj Al Arab
(1999) & Madinat
Jumeirah (Mina
A’Salam, 2003)

The Ritz-Carlton Dubai (1998)

One & Only Royal Mirage (1999)

Atlantis Dubai
(2008)

Only & Only Palm (2010)

Jumeirah Zabeel Saray
(2012)

Anantara Dubai The Palm Resort & Spa (2013)

Ibn Battuta Gate Hotel (2010)

JA Jebel Ali Golf Resort (1981)

Al Maha (1999)

Bab Al Shams (2004)

XVA Gallery (2003)

A Decade of Dubai Hotel Market KPI’s

A Decade of Dubai Hotel Apartment Market KPI’s

30
80
130
180
230
280
330
380
Dubai Boasts World’s No. 4 ADR! (US $250 @ YTD 07 14)

Dubai Hotel Guest-Night Origins
% of Guest-Nights at Hotels
% of Guest-Nights at Hotel Apartments

Condo Hotels
•  Hotel apartments and most recently,
rooms and suites and are being
offered for sale freehold in Dubai on a
‘sale & leaseback’ basis
•  The Address Downtown and Dubai
Mall were the ﬁrst properties to
include ‘condo apartments’ in 2005
•  ‘Real estate tourism’ was part of the
2002-8 property boom
•  There are 16 existing condo hotels in
Dubai, also bearing such brands as
Anantara, Armani, Bonnington,
Fairmont, Kempinski and Movenpick
•  All properties are fully sold out
•  Sales prices range from US$8,000 -
$12,000/m2
•  Known future supply totals 35 new
properties
•  Damac planning >9,000 rooms in total
•  Some operators still do not trust the
Dubai Strata Titling Law

Dubai 2014 Future Conﬁrmed Chain Hotel/
Hotel Apartment Pipeline
Ibis Dubai World
Trade Centre
extension
Chain Hotels Keys Rank
Marriott 10 2,596 1
Starwood 5 2,530 2
The Address 7 2,448 3
Wyndham 3 1,889 4
Rotana 5 1,511 5
Hilton 5 1,505 6
Accor 4 1,390 7
Viceroy 3 1,378 8
Paramount 2 1,047 9
Flora 4 920 10
Hyatt 1 869 11
Premier Inn 3 827 12
MGM 3 692 13
Auris 3 635 14
Rezidor 3 633 15
IHG 2 608 16
Coral 2 532 17
Bin Majid 2 500 18
Citymax 2 495 19
Jumeirah 1 435 20
Chain Hotels Keys Rank
Langham 1 323 22
Emirates Grand 1 300 23
Taj 1 296 24
Frasers 2 281 25
Ramee 1 265 26
Baccarat 1 263 27
Blue Bay 2 260 28
Fairmont Raffles 1 260 29
Rosewood 1 250 30
Teal 1 240 31
Four Seasons 1 237 32
Time 1 234 33
Gulf Hotels 1 230 34
Sunland 1 217 35
Steigenberger 1 215 36
City Seasons 1 208 37
Melia 1 194 38
Millennium 1 151 39
Lotus 1 147 40
Total 94 28,419

Royal Atlantis Resort (2018?)
Sheikh Mohammed
inspects the model

W/Westin/St Regis Hotel & Dubai Canal (2015)

Viceroy Dubai Palm Jumeirah (2017)

Viceroy Palm Jumeirah Projected Returns (US$)
Particulars 2016 2017 2018
ADR 472 507 545
Occupancy 80% 80% 80%
Revenue Per Room 137,760 148,000 159,200
40% Revenue Share 55,104 59,200 63,680
Standard Room Price 449,795 449,795 449,795
Yield Percentage 12.2% 13.1% 14.1%
Lifestyle Beneﬁts 6,605 7,096 7,096
Source: http://viceroydubai.com/

Dubai Pearl (MGM & Baccarat Hotels, 2018)

Damac
Towers by
Paramount
Hotels & Resorts,
Business Bay (2016)

Lapita Hotel, Dubai Parks (Marriott Autograph, 2016)

Bvlgari Hotel at Jumeirah Bay Island (2017)

Nikki Beach
Resort & Spa
Dubai, Pearl
Jumeira
(2015)

Palazzo Versace Dubai, Culture Village (2015)

Future ME by Meliá Dubai @ The Opus (2016)

Future Tower Hotels: Hyatt Regency (2015), Viceroy P17
(2018) & Rosewood (2015)

Future Mall of the World/Mohammed bin Rashid City

Future Pipeline – Unconfirmed Projects at…
•  Mohammed bin Rashid City (MBRC), a new district between Business Bay and
Meydan, in which up to 100 hotels are planned
•  Meraas’ 3 theme parks in Jebel Ali
•  Dubailand, where many projects that were put on hold during the global
financial crisis are now being completed or revived, including City of Arabia,
Dubai Sports City, Dubai Lifestyle City, Falcon City of Wonders
•  Nakheel’s Deira Islands, the first phase of the Palm Deira project
•  Dubai Creek Harbour at The Lagoons, one of several major mega projects
planned in and around Dubai Creek
•  PLUS Likely impact of DTCM incentives for developers of 3- and 4-star hotels,
targeting 35,000 keys in time for Expo 2020

Other Future Demand Considerations
•  With US$315 billion of construction projects confirmed by EC Harris
in August 2014, the UAE real estate sector has rebounded strongly
since the global financial crisis
•  Solid underlying economic fundamentals including low interest
rates, high oil prices (getting lower) and a successful economic
diversification policy are combined with the country’s status as a
financial safe haven in a region where some other nations remain
notably destabilised due to the Arab Spring
•  Tourism accounted for nearly 20% of Dubai’s GDP in 2013
•  This figure that is forecast to grow by between 7 and 9% per year
up to 2020, according to the DTCM, by which year the
government’s aim is to increase tourist arrivals to 20 million
(independently of the 25 million expected to visit the World Expo)
•  Goals aided by fantastic infrastructure, especially airports and
airlines
•  The Arab Spring has caused erstwhile competing tourism
destinations like Egypt, Syria, Lebanon and Jordan to be largely
closed for business as regards international tourism, including intra-
regional holiday traffic from the Gulf, much of which has transferred
to Dubai (although Egypt is recovering, e.g., at Sharm El Sheikh)

Key Facts: Expo 2020 vs FIFA World Cup 2022
Official Name W orld Expo 2020 Dubai FIFA W orld Cup 2022
Location Dubai World Central, Jebel Ali Stadiums across Qatar (all but one
within 60 km, making this the most
compact World Cup in history)
Duration 24 weeks 3 weeks
Dates 20 10 20 - 10 04 21 Summer or winter? TBC in 02 2015
Expected visitors 25 million (DTCM) 1 million (Qatar 2022 Supreme
Committee/Supreme Committee
for Delivery & Legacy)
Key activities Multiple events staged at multiple
national pavilions (70 in Shanghai
2010) representing the world’s
nations
64 football matches
Key facilities 150-hectare exhibition site to form
part of the 140 km2
Dubai World
Central (DWC) ‘aerotropolis’
8 stadiums (was to be 12); 64 team
base camps, 32 training facilities
Related infrastructure 100 new hotels (min), new metro
line, new areas of DWC, new Jebel
Ali theme parks, revival of mega
projects in Dubailand
55,000 new hotel rooms, new
metro, new railway, new airport,
new port, new urban districts, etc,
etc
Legacy ‘Legacy’ housing project will use
site
Upper tiers of 9 stadiums will be
donated to third world countries
!

Expo 2020 Site in Context

Dubai World Central Master Plan showing Expo Site

Expo Site – Computer Renderings

Footnote: Related Social Issues
•  Emiratisation vs expatriates’ and
labourers’ rights
•  UAE nationals in workforce and
hotels
•  Women in business and hotels
•  Doing business under a monarchy
•  Family companies vs global
corporations
•  Aristocracy vs meritocracy
•  Freehold home owners creating
grass-roots democracy
•  Islam in business and banking
•  Sharia-compliant and dry hotels
•  The role of demolition and land
reclamation in city expansion
Prince Charles and Sheikha Mozah of Qatar

Thanks for listening
Tel +971 3 344 3734
Fax +971 4 344 0907

See our web site – www.viability.ae

Contact Viability Management Consultants
Guy Wilkinson
Managing Partner
Viability Management Consultants
PO Box 191234
Dubai
United Arab Emirates
Email: guy@viability.ae
Mobile: +971 50 450 6276
Tel: +971 4 344 3734
Fax: +971 4 344 0907
Web site: www.viability.ae

Evolution of Dubai's Hotel Market

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