Middle East: walking on sunshine
The Middle East is fast becoming THE leisure destination of choice, as Andrew Mellor discovers…
When we talk about the Middle East these days the conversation is always centred around the huge amount of development taking place in this part of the world, based largely around the tourism and leisure industry.
Indeed, in a discussion with a group of leisure industry colleagues just recently, the situation was amusingly summed up when it was suggested that climate change didn’t really exist – it was all the concrete being poured in Middle Eastern countries that was tipping the world round and changing everyone’s weather!
It was a comment that certainly encapsulated the almost unbelievable amount of construction work taking place, not least in Dubai, where the largest single leisure project ever to be built anywhere in the world is gradually taking shape in the form of the incredible Dubailand.
There probably aren’t enough superlatives to describe all that is happening and indeed an increasing number of projects continue to be launched, including those by some of the biggest names in the industry. At the end of February, for example, yet another major new development was announced, this time by Busch Entertainment Corporation, the family entertainment division of Anheuser-Busch, which has confirmed an agreement with Nakheel PJSC, one of the world’s largest property developers, to create the World of Discovery – Sea World, Aquatica, Busch Gardens and Discovery Cove – on The Palm Jebel Ali in Dubai.
The two organisations have finalised an agreement that calls for the phased construction of four theme parks on the second of the company’s three Palm man-made island developments. Nakheel will invest the necessary capital to build and operate the parks and BEC will license its brands to Nakheel and operate the parks under a management contract.
The comments made at the announcement of the project by Nakheel’s CEO Chris O’Connell sum up very well what is happening in the area and provide a taste of the major brands that are moving in.
"Dubai has become one of the world’s leading tourist destinations," he said, "and a key part of the strategy has been attracting world-class entertainment brands to the emirate. We have already concluded partnerships with major brands such as Trump, Cirque du Soleil and Atlantis, and the partnership with BEC is a further example of Dubai’s growth as a city of global prominence."
Just to provide an idea of the scale of some of the projects in the area and the development work involved, more than 300 million cubic yards of sand and 10 million tons of rock have been used in the construction of The Palm Jebel Ali, with the island adding more than 52 miles of coastline to Dubai. Reclamation of the island is nearly complete and Nakheel has already begun putting an infrastructure in place that will eventually support a population of more than 280,000 people.
It’s staggering facts and figures such as these repeated many times over in all the different projects being created that are truly amazing the rest of the world. Everyone is watching in awe as the creation of a totally new, world class leisure and entertainment industry continues unabated. And all the biggest brands are getting involved. Paramount, Warner Bros, Universal, Marvel Comics, Six Flags, HIT Entertainment, to name but a few, are set to join Busch as they tie up with Middle East based companies to develop attractions and deliver global brands and intellectual property to this part of the world. Furthermore, projects such as the National Children’s Museum of Jordan and the Grand Egyptian Museum are witness to the fact that there is more to all this activity than just internationally recognised entertainment names.
Indeed, the general growth and development of the tourism industry worldwide was outlined at a panel discussion at the Tourism Development Projects and Investment Market ’08 event held in Dubai in January, led by IAAPA president and CEO Charlie Bray.
He noted that the World Travel & Tourism Council expects substantial growth worldwide in 2008 and beyond, at 4.3 per cent annually over the next 10 years, and that tourism in some countries in Asia and the Middle East has been expanding at nearly twice the rate (six to eight per cent) of the world average.
"In fact, tourism is the fastest growing economic sector worldwide today," he said. "Within this expanding sector, the amusement and attractions segment is expected to contribute its own steady increase. Fuelled by vibrant expansion in nations throughout the Middle East, Asia, and elsewhere, the global attractions and leisure business is expected to grow significantly. Worldwide visitation was up again in 2007 and consumer spending on theme parks is slated to rise by nearly five per cent annually through 2011 – resulting in a US$28.5bn industry.
"This increase will be led by the two fastest-growing attractions markets today," he continued, "the Middle East and Asia. According to PricewaterhouseCoopers, the annual growth rate for the amusement sector in the Middle East – Europe – Africa region is slated to be over five per cent through 2011, raising yearly attendance to 154 million in just four years, with much of that growth coming in the Middle East. Construction of new facilities across the region, particularly in the United Arab Emirates and eastern Europe, will provide the fresh experiences that lead to this expected rise in attendance and guest spending. These investments range from the Dubailand mega-project here in Dubai to the World Gardens theme complex in Qatar to a host of new family recreation centres in Saudi Arabia."
Bray also noted that the upward trend in industry growth globally mirrors that which continues to "charge ahead" in the Middle East, with, at the broadest level, some regional analysts projecting upwards of US$3tn in spending on leisure and tourism projects and supporting infrastructure over the next 20 years.
"Within this overall tourism sector," he revealed, "current estimates put the region’s attractions, entertainment and leisure segment at US$10bn in annual revenues already, with yearly growth at 20-25 per cent. These projections are bolstered by reports from our industry of five-10 per cent of all new retail space being dedicated to family entertainment and amusement offerings, and by the several billions of dollars in investment already committed to building Middle East parks and attractions.
"In fact," he went on, "the potential for more and more visitors to this region’s attractions is so great that PricewaterhouseCoopers anticipates the US$50m in guest spending at parks and attractions in the Middle East in 2009 will swiftly quadruple to over US$200m a year by 2011. The reason, clearly, is the sheer number of exciting and incredible projects on the horizon."
Also taking part in the panel discussion was Keith James, president of US-based Jack Rouse Associates, who spoke exclusively to InterPark about the market in the Middle East, firstly on how the leisure and tourism industry has changed in the area in the past five to 10 years.
"Ten years ago there wasn’t a leisure and tourism industry," he said, "but JRA is now seeing very, very aggressive development in Dubai and Abu Dhabi, with some other Emirates following suit. It’s UAE centric with Qatar, Bahrain, Kuwait and Saudi Arabia all making big noises about major developments and doing massive urban redevelopment projects that have entertainment and cultural developments in the past five years.
"It is almost the case that they are still building the countries themselves," he continues, "as they bring everything up to date. On the entertainment side of things, primarily in Abu Dhabi and Dubai, the trend is major intellectual property development and bringing in brand names that people will recognise. There is some local IP but it is mostly international, such as with Ferrari World and Universal."
The challenges faced with such massive development are many and James cites the pace and speed at which countries and cities are trying to achieve their development as one of the main ones, as well as providing the infrastructure to support all the developments.
"The majority of Dubailand is happening," he noted as an example, "but it’s a few years behind what was originally planned because of this. However, eventually the primary challenge will be once they are open will they have the guests to fill them? Tourist numbers are growing but it’s not Las Vegas, London or Paris, so achieving the required attendance numbers will be a huge challenge."
He concurs that competition for people’s leisure time and spend will be as fierce as it is elsewhere with so much product and so many spectacular offerings coming on stream, saying that tourism numbers will be good but asking "will they be good enough initially?" Looking to the future, James commented: "The infrastructure has to catch up and get out in front. The product they are building and the contemporary buildings will be the best in the world but will the numbers be high enough? Can they sustain things long enough to ensure long term success?"
Fellow design company Forrec, of Canada, is also involved in a number of projects in the Middle East and the company’s Steve Rhys notes many changes that have taken place in recent times in the leisure industry there.
"Since Forrec developed the first Magic Planet for Majid Al-Futaim in the mid 90s, the market in the Middle East has changed dramatically," he said. "This is most pronounced in Dubai. The real estate and tourism thrust has been joined by a call for a full range of destination family attractions such as theme parks and waterparks, resorts and themed retail projects. The demand is for international quality, branded, legitimate operating companies to bring their products to the market. This trend is evidenced throughout the Gulf Cooperation Council.
"The logical extension of the requirement for branded entertainment to come to this region has led to numerous brand licensing agreements between local GCC investors and the brand IP companies. This is quickly overtaking the locally grown themed entertainment developments that were announced less than five years ago," he explains. And he too notes some of the challenges being faced with the pace of development.
"Local developers are being met with a variety of challenges that would normally arise in the planning and execution of large projects were they to happen most anywhere else in the developed countries," he said. "However, aggressive scheduling has put extraordinary pressure on suppliers of attractions and rides, the provision of municipal services and infrastructure and the assembly of qualified operations and management teams to meet the demands of opening day."
And as far as competition is concerned, he noted: "With the number of projects coming to market over the next five years, there will be very significant competition. With the majority of these projects occurring in the GCC, the competition will be concentrated. However, the converse of this is also true, in that with the critical mass of the total number of projects in the region, and especially Dubai, the region will become competitive with other international tourist destinations in the global market.
"In spite of the challenges associated with rapid growth," he added, "we believe that careful and considerate planning and design and product/experience distinction will help to ensure a positive future."
Chuck Hendrix, CEO at Innovative Leisure Partners based in Texas, US, feels the leisure and tourism industry in the Middle East has undergone a "maturation process."
"Investment is now taking a more global and sophisticated viewpoint in targeting projects," he said. "The level of investment and the overall scope of the projects have grown exponentially. It is still very much in the formative stages, but the unprecedented planned growth bodes well for these collective industries."
And he highlights some current trends. "The trends have been emerging from a local to a global economy and diversifying away from a completely petrol dollar driven economy. Many parts of the Middle East are fortunate to have rich cultural heritage and magnificent coastal areas with beautiful beaches. The trend for a while now is to develop and market the region as a global leisure destination. This vision is being backed by billions of dollars of investment, much of it coming from the various sovereign wealth funds. They are not hesitant to invest their own funds to drive their vision. They are aligning themselves with high profile, multi-national corporations."
The challenges Hendrix cites are "the usual list of suspects. Spiralling inflation driving developmental costs often taking projects over budget before they break ground. Infrastructure issues. Sourcing qualified talent to take vision planning to reality. Untested waters from a conceptual and feasibility perspective. All the labour is expat – finding them, acquiring them, housing them, retaining them. Shifting critical paths." And he too agrees that competition for leisure time and spend will be acute for all involved, noting that there will be some failures but some "mind boggling successes too."
Of the future of the theme park and leisure industry in the Middle East, he said: "Hold onto your hat. The next 20 years will see the most explosive growth in the industry in sheer numbers of projects that has ever been witnessed."
Phil Taylor, managing director of Team Leisure LLC based in Dubai, is another industry representative well qualified to comment on the explosive growth of the Middle East market, noting many changes in recent years.
"The single biggest change over the past five to 10 years is the level of recognition and acceptance that the region now has as a destination for international tourism," he says. "This has been driven by a number of factors. Some are global, such as the affordability of air travel and the increased ease of cross-border travel. Others are local, such as the Dubai effect, where a drive for quality has put Dubai on an equal footing with any city in the world. This drive is having a ripple effect all around the Middle East. With it comes a growing realisation of the possibilities that exist for the leisure industry, a realisation that is taking the leisure and parks industry off the local stage and onto the world stage."
And he continued: "The majority of leisure offers in the Middle East to date have been small scale and have tended to be focused on the local market. The advent of world class attractions in Dubai, like Wild Wadi and Ski Dubai, is changing all that and a portfolio of amazing parks, attractions and museums are in the process of being planned and developed throughout the UAE that will be world class and will draw visitors from the region and beyond.
"Perhaps the words that describe this effect best are ‘confidence’ and ‘optimism’ and it’s going to continue throughout the region," he goes on. "The growth in tourism to the region seen to date, perhaps best summed up in Dubai’s stated ambition to attract over 15 million hotel guests annually by 2015 from 6.4 million in 2006, is a practical expression of this. The leisure industry is one of the key tools being used to achieve this."
He notes many challenges for developers of leisure attractions in this part of the world, saying that in broad terms they fall in to two categories – market readiness and environmental.
"Market readiness includes such macro-economic factors as political and economic stability, restrictions on ownership and the creation of a transparent, commercial framework for developers. At the other end of the scale, it includes the need to create a propensity to visit in a market that has had limited previous access to parks and attractions, which generally has small centres of population and crosses a wide range of diverse cultures.
"On the environmental side a key factor to overcome is the desert climate. This is a particular consideration for all day attractions such as parks if all year round operation is targeted. In addition, other environmental factors that have to be addressed include ensuring the availability of adequate power and water supplies for large scale developments and the absence of a large pool of locally available skilled labour and creative talent.
"Again, Dubai is a leading example of how these challenges can be overcome and is at the forefront of the countries that are addressing these. They are doing this by providing clear leadership, a strong, focused vision for the development of Dubai and by creating a critical mass of parks and attractions that are aimed at making Dubai a tourism and leisure hub for the Middle East."
He agrees that competition for people’s leisure time and money is as fierce in the Middle East as it is in any part of the world but observes: "With the number of tourist visits, both from within and from outside the region, growing rapidly, there is also still a huge opportunity for new attractions. The current number of parks and attractions is still quite low relative to the expanding size of the tourist market, particularly given that it is not enough to just build hotels; you have to also develop a strong platform of leisure offers if one is to develop a sustainable tourist industry.
"Add to this the fact that the population of the Middle East is also growing rapidly and that, typically, as much as 45 per cent of the resident population of the Middle East is under the age of 24 and you have a market that really is open to new offers."
And he continues: "Given the scale of the investments proposed and the opportunity that is being created for growth of the leisure industry, it is easy to suggest that the future holds ‘exciting times ahead’ for anyone involved in the conceptualisation, realisation and operation of theme parks in the Middle East."
Among the well-known brands on the way to the area is Paramount Pictures which has signed a deal with real estate, hospitality and tourism investment company Ruwaad Holdings to build a Paramount theme park in the UAE. Darrell Metzger, CEO of Ruwaad Destinations, will manage the development aspects of the project and is well placed to comment on the Middle East’s booming theme park and leisure industry.
"Up until the turn of the century, the Middle East was a very local, domestic-driven market in terms of the design and operation of theme parks," he says. "They were primarily created for the entertainment of the local residents.
"Since 2000, there has been a tremendous change in the focus of entertainment, as regional economies have turned towards tourism as a means of helping to diversify their economies away from their dependence on oil. This has resulted in the prolific influx of globally recognised entertainment brands such as Universal Studios, Warner Bros, Paramount Pictures, etc. The trend has also branched into other brands that will attract tourism, such as The Louvre and Guggenheim museums, as well as celebrities and personalities with the likes of Tiger Woods, Ernie Els, Anna Kournikova, etc. The Middle East region is well on track and has the ambition and the means to become a global destination and a brand to be recognised and reckoned with around the world.
"As the entertainment industry has moved from a local-based market to ambitions of a regional/global market," he continues, "they have reached out for the industry’s most recognised consultants, designers and suppliers. While the Far East still remains a rapidly developing market and close competition for the region, the Middle East will most likely present the widest range of opportunities for leisure businesses and brands in the next decade, as a number of local developers realise the opportunities for growing entertainment in the region.
And he cites one or two additional challenges to those already mentioned. "Competition for attention among all the multi-billion dollar developments will be intense. Challenges include a finite number of tourism arrivals, other countries and regions around the world are planning for similar projects and the entertainment offerings in this region alone seem to be growing at an exponential rate. Standing out among the clutter of entertainment destinations will be the most difficult marketing challenge."
But he notes that at the moment, competition for the leisure dollar is not so high. "Competition for the leisure dollar is not so intense now, simply because there are so few leisure activities currently available. Pricing for those activities which are available tends to be high. Hotel prices in this region are some of the highest in the world (due to room shortages). Prices for leisure parks and activities will also tend to be on the high end, due to demand exceeding supply in the short term.
"However, if all the announced projects are built, it will depend on regional tourism organisations to create and sustain a very high level of international and domestic tourism traffic. For example, the 1990s witnessed a major boom in theme parks throughout Asia (similar to what we expect here). However, visitors never materialised as assumed and the result was the failure and subsequent closure of a number of destinations and theme parks in the late 1990s."
Of the future, he predicts an interesting time for the theme park industry in the Middle East.
"The theme park industry is new to this region," he said. "There will be many new projects opening over the course of the next decade and time will tell if they will be successful in the long term. Some will be a tremendous success and will spawn new concepts which can be exported to other emerging tourism markets. It is a learning process that all investors and operators will undergo. Some projects will find that their concepts (whether new or proven, i.e. Hong Kong Disney) just don’t work in this market. Others will find that the market may never appear due to a lack of tourism, or they simply lack the marketing expertise and money to reach their market."
UK consultancy company Vision XS, which among other areas specialises in helping operators provide the best possible experience for their guests, is also involved in the boom, notably with work relating to Dubailand. CEO Tony Sefton notes the huge investment and a high desire for quality as major changes in the leisure industry in the past decade, while adding that there will be a need to cater for many different types of visitor.
"More than three quarters of the world’s population can fly to this part of the world in a few hours," he says. "Emerging markets, local and mature markets will visit and they all have different needs so there will be opportunities to cater for many different requirements.
"One of the main trends," he continues, "is buying intellectual property and building products around this. This is being done throughout the region and is a quick way to get in, although some are also trying to develop their own brands."
Like our other interviewees, he believes the climate will make parks very different to those elsewhere with a different feel, with more indoor facilities and high food and beverage capacity because "it isn’t an ‘eat and rush’ mentality." And he agrees that competition for leisure time will be a crucial consideration for operators.
Of course the DEAL trade show in Dubai is due to take place this month (April), as it has for many years now, and exhibitors at the show have also, not surprisingly, seen a significant shift in activity over the past few years in the region.
"Six years ago everything was at the conceptual stage with many projects just being talked about," noted John Davies at OmniTicket Network, a regular attendee at the event. "But last year it was clear things have moved on a great deal with many projects actually happening and visitors from many of the major projects attending the show. We went there to see representatives from places like the Ferrari theme park, Dubailand, Global Village and more and were not disappointed."
In discussing the Middle East with our industry experts, it is clear that the leisure and tourism boom has spread throughout the region. As is well-known, the UAE, notably Dubai and more latterly Abu Dhabi, is leading the field but other areas becoming increasingly active include KSA, Bahrain, Kuwait, Qatar and Egypt.
The industry’s development in the Middle East is truly astonishing and makes for an amazing story. There will – in years to come – be many stunning facilities to enjoy and if it isn’t necessarily the case now, it will certainly be an incredible place to visit when they are all complete. It’s going to take a mammoth effort to draw in the required numbers of tourists to sustain so many projects and there will doubtless be a few casualties along the way, but for sure, Dubai, and the many other cities currently involved in this unprecedented leisure industry boom, will be a subject regularly on our lips for a long time to come.