The economic turmoil currently being experienced in Dubai has, as we all know, placed much focus on the many proposed leisure developments in the country, not least those within the huge Dubailand project. Some have simply been delayed, some postponed and some, inevitably, may not get built at all. But is it all doom and gloom or is there light at the end of the tunnel? InterPark spoke to industry experts with experience of the Dubai market and the wider Middle East market to get their thoughts on how they see the current situation and how they feel things will move forward in the future

David Camp, director of the Economics practice at AECOM (formerly ERA), London, UK

“There is a market there because people are still going,” observes Camp, who has been working on projects in Dubai for almost 10 years and is well placed to comment on the challenges the country faces after it told the world what a unique tourist and entertainment destination it was going to create.

“Back in 2007 they had a range of projects in the pipeline, including US$64 billion plans for 10 theme parks and related resorts in Dubailand, along with half a dozen other major attractions, all to be built within 10 years and with a target attendance of more than 30 million,” he notes.

Of course as Camp adds, nothing like it had been planned or built before and many questioned whether or not the numbers visiting Dubai would ever sustain such incredibly grand plans. Having compared Dubai with other major tourist destinations and looked at relevant attendance levels, according to Camp Dubai was over ambitious when it came to its numbers. It wanted to be an Orlando, he comments, when in fact more realistic targets to aim for would have been similar to Australia’s Gold Coast. Even in best case scenarios, ERA’s analysis showed numbers would be way off, by millions, even by 2020.

Camp also notes that if all the projects had been built, this scenario would have left theme parks and other venues fighting it out in a massively competitive marketplace and inevitably, low numbers would have led to commercially unviable venues which would no doubt have deteriorated rapidly and the dream would have been over.

“I can understand why they want a Universal Studios because of the strength of that brand,” says Camp. “A LEGOLAND park or a LEGOLAND Discovery Centre would also suit the population dynamics and maybe an Aqua Dunya too, although whether or not another waterpark makes sense is open to question. When it was first mooted it was a good idea because it filled a gap in the market, but there are now three waterparks there already.

“Kidzania has opened in the Dubai Mall and should be popular because of the young, affluent market of both Arabs and westerners. There is also demand for indoor entertainment because of the heat. If the Mall of Arabia goes ahead the Restless Planet attraction will be great, while outside Dubai, the Ferrari Park in Abu Dhabi will be appealing.

“There are still some nice ideas in the offing but the challenge will be to get any kind of return on investment as the development budgets are huge.

However, they need to do something to get their reputation back. A major issue is the limited transparency and lack of information in the region. This relates to the financial situation, status of development plans, population numbers and a range of other information and this creates a lack of confidence in the market. Everything in the regional press is positive and bad news isn’t reported or is glossed over. The bank default is a good example. There was no warning about what was coming and now people don’t trust what is coming out of Dubai. This has been reflected in Moody’s Investors Services, the credit ratings agency, downgrading all six government-related issuers. And it has a significant negative impact on potential inward investment.  The government’s refusal to bail out what are effectively government sponsored companies is also an issue that has further harmed the global view of Dubai.

“There has been a decline in population in Dubai due to the recession.  Residency is tied to employment so people that have been made redundant have had to leave the UAE. As a result the supply and demand balance for property has shifted from undersupply a few years ago to oversupply now. The real estate market has fallen through the floor and it will need significant investment to stabilise it.

So what effect is this all having on developments in neighbouring countries?

“A lot of the big development projects in other Middle Eastern countries were being driven by UAE companies so yes, there are some knock on effects,” Camp points out, “and not just in leisure but in a range of different sectors. But it’s not necessarily a bad thing that development has slowed as some companies were looking to create mini Dubai’s across the region.

“These plans still exist, as do the dreams for Dubai. They are still keen to go ahead with projects but they just haven’t got the money at the moment.”

Phil Taylor, Managing Director, Team Leisure LLC, Dubai

“2009 was a good year for indoor leisure attractions in Dubai, with the completion and opening of Sega Republic, Kidzania and the Burj Khalifa Observation Deck, all at Dubai Mall, and Stargate in Za’abeel Park. Spring 2010 will see the opening of Mirdif City Centre shopping mall and Playnation, a 20,000 sq m cluster of leisure offers that includes two sky diving tunnels, an interactive football experience, a children’s edutainment centre and other indoor family attractions. These additions significantly increase the number of indoor attractions on offer in Dubai and complement existing attractions such as Ski Dubai and the Dubai Aquarium.

“By contrast, it is clear that progress on Dubailand, with its proposed portfolio of world-class theme parks and attractions, has been materially impacted by the global economic situation. Work on all leisure projects is on hold or is progressing only very slowly. Completing the Formula One Theme Park, which came to a standstill last year when the developer ran out of funds, and starting construction of the Universal Studios Theme Park are clearly projects that Dubailand will be prioritizing. Other Dubailand leisure projects, however, are really only likely to progress as funding and economic recovery permit.

“The overall goal for Dubai has to be to continue to complete projects that add critical mass to the available leisure offer. This will drive increased tourism and further advance Dubai’s goal of becoming the “Florida of the Middle East.” The hotel and shopping offers now available in Dubai are second to none and leisure attractions are a key tool to drive occupancy and retail spending respectively.”

So has the economic crisis in Dubai killed off many projects permanently?

“The phrase ‘postponed’ rather than cancelled tends to be used but undoubtedly a number of projects that have yet to commence on site will be cancelled or modified if they are no longer considered viable in the present economic climate. The ambition to make Dubai a major leisure destination, however, appears to be undiminished and in the majority of cases it is only the timing of the project that is being reviewed.

 “The global economic crisis has hit everyone, just not necessarily in equal measure. Dubai appears to have been impacted by the economic crisis more than most but it is also striving to achieve more than most.

“The global economic crisis has made everyone more cautious, not to mention borrowing money much more difficult. The recent press coverage of Dubai’s financial challenges has simply reinforced this. The result is that countries that were following or about to follow Dubai’s example are naturally all taking stock and deciding when and how best to proceed.

“Again, it would appear that it is the timing of leisure projects that is being impacted more than the ambition. Abu Dhabi, for example, continues to press ahead with its Saadiyat and Yas Island developments but to a revised timetable. The Ferrari Theme Park is due to open on Yas Island this year but design of the waterpark and Warner Studios Theme Park has yet to commence. There will be some leisure projects, however, that will eventually be cancelled.”

Alan Fleming, Zarf Worldwide, Dubai

“It’s impossible to say what’s going on with all the projects and it’s true Dubai has ‘proposed’ some ambitious plans which aren’t talked about any more. But as far as I know Mall of Arabia is still going ahead. They’ve broken ground too and are building as well as still attending major exhibitions around the world and promoting their mall and brand which includes the dinosaur theme park. MAF, who are behind the City Centre and Mall of Emirates malls and encompass the brand Magic Planet, are building a new mall in Mirdif (near the airport)which will have a Vegas-esque indoor skydiving and, of course, a Magic Planet.

“As far as Dubailand goes, I’ve not heard anything on it, although driving past it shows the ground is laid aside and there is a big sign with Spiderman on it, but otherwise it’s desert. Anyone, though, who has worked on a big project and particularly in the Middle East will know that wheels move slowly at times. My advice is not to count on it, but be ready for it if it does go ahead.

“The economic crisis worldwide has certainly had an effect on Dubai projects, but people talk about an economic crisis in Dubai – there isn’t one as such. The Dubai Holdings company invested the country’s money abroad (wisely spreading the risk of investment outwith the region); they bought shares in hotels in New York and London as well as P&O, the London Eye and several other major brands in Europe.

“The economic crisis affected the whole world and naturally people stopped spending in those hotels and on those cruise lines which meant the investments didn’t give the return they should have. This, however, hasn’t impacted consumer spending in Dubai which according to a report in January was up three per cent.

“The worst impact the economic crisis had was worrying the ex-pats in Dubai, who took to a mass exodus, in many (but not all) cases leaving the country with debt which didn’t help things.”

And what effects does Fleming see the Dubai situation having on other emirates and neighbouring countries?

“I don’t think Saudi Arabia, which is one of the biggest markets in the region, cares about the financial crisis. They continue to come to the UAE and spend money and the same could possibly be said for neighbouring countries. Lebanon passed through the crisis without concern as the government strictly regulated investments. Major developers from Dubai are now stepping into markets such as Kuwait and MAF are opening a mall with an indoor waterpark in Bahrain. It’s always going to be difficult to do a theme park in the Middle East because of the weather, but it’s that same reason that drives traffic into the air-conditioned malls and created a culture around going to a mall.

“Having said that, Abu Dhabi is on track for the opening of the world’s first Ferrari theme park which will get a lot of tourists from the region, including Dubai, and in-transit passengers who stop in Dubai for a couple of days. Between that and the Burj Khalifa (the world’s tallest tower) most visitors to the region, given the time, will surely stop by those marvels for the sheer tenacity of them alone. Whether they will come back again though remains to be seen.”

Prakash Vivekanand, Managing Director, Amusement Services International LLC, Dubai

“The situation is very unclear. There is a skewed understanding of how these theme park projects were proposed. It was real estate development that was driving these and the parks were the icing on the cake. With the real estate development slowing the theme park projects have been pushed to the back burner.

“Some parks were announced as part of Dubailand, a 2.2 billion sq ft development in an area called New Dubai which is to be a mixed use development of residential, commercial and leisure. Everyone jumped on the bandwagon but a lot of proposed developments couldn’t make the cut and follow through so these, by private developers, are definitely cancelled or pushed back a long way.

“Some, like Universal Studios, with government backing, have not been called off but have been delayed until the market improves and funds can be found. I think the funds will be found eventually, but the banks suddenly got extra careful and tightened their grip so it has become difficult to find the funds for these projects.

“With the Union Properties F1 Theme Park, they have invested more that 60 per cent in the park and much of the commercial element around the property but can’t take it to completion because they can’t find an investor to complete the last element.

“The Dubai muddle is because of not being able to find investors. The real estate element is crucial to drive the rest of the development because then you will get the tourist numbers coming in which so much depends on. But Dubai has also been hit by the international economic situation and people stopping travelling as much as they did.

“Dubai is the ‘face’ of the area as far as real estate is concerned so yes, what happens there has an effect on other areas and countries around it. But the region is not totally dry of projects – some have recently been announced in Saudi Arabia, for example. We have seen a dip in visitor numbers in some places in comparison to what venues were generating in 2008. Some are flat, some are down 5 per cent, but that’s still not bad. Tourism is down 30 to 35 per cent so spend by consumers is still happening which should encourage investors still. There is a huge remodelling taking place at Hilli Fun City too, so a lot of projects are still on.”

Yasser Goneid, General Manager, Zamperla Middle East, Dubai

“The big projects are ‘on hold’ without a specific time frame. The real estate boom in Dubai was the engine behind all the new amusement and entertainment projects. It is estimated that the real estate sector will take about three to four years to recover. It is not known now if at that time these projects will still be feasible. In my opinion these projects might find alternative investment opportunities but will probably be quite different from the original plans, in the sense that they will be smaller, scaled down or completely different concepts.

“On the other hand there are lots of smaller projects, especially indoor, that are going on with success. A clear example is MAF, which after lots of successful projects is going to open a new indoor project in Mirdif with lots of our rides.

“The economic crisis has for sure affected almost all projects, but whether any will be completely cancelled it is not clear at this time. I believe that some projects, which relied completely on real estate demand, could be cancelled, but the ones which have enough potential to succeed independently will eventually regain their potential, although they might endure major changes as mentioned.”

And is there a knock-on effect into other, surrounding areas and countries?

“The economic suffering is everywhere, including neighbouring emirates and countries. But the crisis is felt differently from one place to another. There are some areas in the Middle East where there is potential for growth in the amusement sector and the demand still exists, even during the crisis, in emirates like Abu Dhabi and countries like Egypt. Jordan, Iraq and Iran are for sure interesting, growing markets. In some countries projects have slowed but are still going on, such as in Saudi Arabia.

Gerry Robinson, director, Trade Shows International, UK

“The realism about business in Dubai is that, while the property market has collapsed and finances are tight, shopping malls are still doing good trade and the FEC markets are still doing well. Dubailand, the major scheme for the creation of a series of theme parks, is still stalled but, to those who were involved from the very beginning, it was always going to be a project that would be unlikely to meet the timescale originally envisaged. If anything, the economic crisis has enabled developers of various projects to re-assess and to set out a more realistic plan for their completion.

“It is difficult to ascertain whether any projects will not be constructed at all because there is still optimism and a strong desire to ensure that they will get built, even if it takes longer than first planned.

“In the remainder of the MENA region projects are being completed, especially within the FEC sector.

It is also very evident that there are emerging markets in Africa, with new amusement parks being opened recently in Morocco and others planned for Nigeria.

“Most of the issues arising from the current situation will be the focus for developers, investors and senior management of attractions facilities at the forthcoming Middle East Attractions Forum  (MEAF) which takes place on April 24 and 25 in Dubai, coinciding with the DEAL (Dubai Entertainment Amusement & Leisure Expo).

Jean Habre, General Managaer Amusement Sector, Al Hokair Group

“One of the prime vision’s of  Dubai’s government was to create a touristic destination, big traffic and a hub in terms of leisure activity for the whole region, from Africa to the Far East. Major projects were planned with the creation of Dubailand, hosting 40+ mega projects, each one having its own identity. With those projects, everybody was aware that they would not survive on their own as a leisure activity, so each one has to develop a real estate programme around it, with multiple use such as retail, hospitality and the final and most important part of each programme, housing.

“With the offer being much higher than the demand, the repetitiveness of each programme and the international financial situation, where the investors/speculators find themselves with no back up and financing from the specialised houses and banks, most of the projects where forced to stop or be cancelled.

“Most of the projects were in the planning and financing stages, so they had to stop, while the few of them that had already started before the second half of 2008, had to continue to cover their initial investment. But as far as I am concerned, they will do well because of their limited number and the support they will receive from the local authorities.”

Habre believes the economic crisis in Dubai has killed off many projects there permanently, especially ones sponsored and financed by the Dubai government. But he also believes what happening in Dubai will have a positive knock-on effect on developments in neighbouring emirates and countries.

“Investors will be more conservative and realistic. The professionals (already in the leisure business) will continue and survive, newcomers/speculators/those looking for new opportunities, will go back to their core business.”

Sanjiv Ahluwalia, CEO, Polo RAK Amusement LLC/WOW RAK theme Park, Ras Al Khaimah, UAE, and Polo Amusement Park Ltd., India.

“As regards the theme park industry in Dubai, our information would be based on our experience as a developer as well as media releases for other projects. The  Dubai market in 2007-2008 saw an influx of major theme park operators . At least 10 were planned, including Six Flags, Legoland,  Dreamworks Animation park, Paramount Pictures park and one of the most promising, Universal Studios Dubailand. Other projects included  Busch Entertainment (Worlds of Discovery) , Freej theme park and the F1 theme park.

“The media gave extensive coverage and saw significant ad spend on the announcing of the projects which were backed by prominent real estate development groups. In more recent times, there is no media coverage and the only media coverage is that the opening schedules have been deferred and the developers have chosen to withhold their comments.

“The year 2009 saw the opening of two projects, the SEGA Republic, an indoor amusement park in the Dubai Mall, and Stargate, a family edutainment centre, spreading across 260,000 sq ft, located inside the 52-hectare Zabeel Park.
“Projects have apparently been put on hold. There are reports of a dilution of holdings, but no formal announcement of any project being called off permanently, even in cases where mega global brands behind a particular project have reported financial crisis. The only thing certain is the uncertainty of the future of these projects.  Projects in Abu Dhabi and our project in Ras Al Khaimah are in progress and is scheduled for opening in April 2010

“But despite the financial situation, the theme park industry can expect support from the tourist market which has reported a growth.”

Michel Koborsi, Gondolania, Qatar

“Dubai’s strategic planning and long term goals are predicated on the premise of being the very best there is to offer on a global scale and not just within the region. Its market audience is not just the GCC, subcontinent and neighbouring others; it includes Europe, the North Americas and anyone else who listens and wants what Dubai has to offer. The infrastructure Dubai has and is planning for is to cater to this vast influx of global tourism and trade. Keeping this in mind and its long term objectives, I am very positive that Dubai will achieve success in completing most, if not all, of its proposed projects. Yes, there is a crisis as is obvious and exaggerated at times and the hurdles are plenty, but I am sure the faith and determination is more now than there was before the economic slow down. And that’s all it is, an ‘economic slow down’ that has postponed everything related to credit and finance, be it as an individual, a corporate and/or a country. There has been a slow down, not a depression, and although projects have stopped given the global scenario, it will happen and be complete as soon as restructured alternatives and time frames are put in place and executed.

And does he think any projects have been permanently killed off? “It’s hard to have intel as to how many projects were and/or are planned for Dubai, let alone have information as to how many will never materialise. My guess is that it is all relative to the global economics and based on short term/long terms goals new time frames will be established, planning and deliverables restructured/reorganised. Permanently killed off? I don’t think so unless the whole world/region sinks into depression, then yes.

“Dubai has always been and is to some extent even now the most desired tourist destination within the region. There has been a recession and most of it has impacted Dubai with a percentage of its expat workforce forced to abandon ship, but then again it is that percentage that has left that will not be part of the existing market segment/audience for Dubai. There is still a major workforce employed within the country which still reaps its salaries and benefits and to that end spends in parallel with their habitual lifestyles. Tourists still do and will visit Dubai from the region and globally too.”

Michael Hesse, Sales Director, Huss Park Attractions, Germany

“There is still slow development even in the Dubailand complex and not only on the side of parks with rides and coasters. Most people consider the Universal project as a potential candidate in the area of theme parks to go ahead first, maybe facing some obstacles on its way, like at the present time.

“It is really a situation like someone has pushed the reset button. I am convinced that Dubai will continue to follow the strategy of developing the country into a tourist destination and that the plans will be realised – but most likely in a downscaled and more feasible approach.

“Dubai itself is not particularly affecting the situation in other areas (of the Middle East) but the financial crisis has impacted also development plans in other Emirates due to the worldwide existing reluctance of big investors and affected companies.”

Andrea Munari, sales director IE Park/SOLI Bumper Cars

“The year 2009 saw a total paralysis of the outdoor projects (in Dubai). Operatively on Dubai we are progressing only with some indoor projects (in Dubai-Sharjah-Ajman – very near to each other).

Regarding the outdoor projects we are informed that some should progress despite the current financial crisis, such as Universal. F1X is said to be looking for new investors. I believe the crisis of 2009 has killed 90 per cent of the outdoor projects.

“Definitely it (the financial crisis in Dubai) has had an impact on neighbouring Emirates and countries. Getting a letter of credit out of most of the Middle East countries is no more like before. Now most of the time we have to wait several months and it will be more complicated in the future too. We were talking of few weeks, if not days, before 2009. The restrictions and controls imposed on the financial system have also reached the Middle East like in many other areas, first of all North America and Europe. It will be a new and permanent scenario for the years to come.”