the evolution of the dubai hotel sector 19 01 15

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 o!ces

•  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? –  E"ective 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 tra!c 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 sta", 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 o"ers 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)


Ra!es 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 o"ered 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 Ra!es 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 tra!c 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

Off ic ia l Name W orld Expo 2020 Dubai F IFA 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: [email protected] Mobile: +971 50 450 6276 Tel: +971 4 344 3734 Fax: +971 4 344 0907 Web site: www.viability.ae

the evolution of the dubai hotel sector 19 01 15

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