Bridging the Gulf of Perceptions
How the Gulf meeting industry is coping in the wake of the current economic crisis.
By Rob Nicholas
The Gulf States have long shared the same mission statement (borrowed from a popular Hollywood movie): “If you build it, they will come. “ But given the global meltdown of the last seven months, confidence in the statement has waned in some quarters. “Will they come?” is the question reverberating throughout the region, whether asked out in the open or from behind closed doors.
Take a look at the reality for the Gulf Cooperation Council (GCC) countries. The GCC consists of six states (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates), each with its own dynamics and market fundamentals. Even beyond this, the United Arab Emirates (UAE) consists of seven sheikhdoms, each again with its own policies and directions.
Many commentators have made the mistake of lumping the countries together in a single basket, but this creates an overly simplistic and skewed view of a complex region.
There are many similarities between the Gulf States. Each started out as desert with indigenous Bedouin inhabitants, where trade, fishing and pearling provided income before oil or gas reserves. Each has developed into established business and tourism hubs, albeit with different degrees of success. And most importantly, each has achieved its development in a single lifetime, while competing with destinations that rose over a great many generations.
However, the Gulf region as a whole has been hit by the non-discriminating economic crisis, as has the meeting industry worldwide.
“International companies seem to have issued blanket instructions that have reduced both meetings and incentive travel irrespective of how well local businesses are performing,” explained David Hackett, chairman of BI Worldwide Group. “Incentives have been particularly hard hit, while meetings business is now taking place closer to home and, in some instances, is being reduced in time scale so that any elements of leisure are minimized. Budgets have certainly been reduced.”
Desert of Dreams
With twice the number of hotel rooms as its closest competing Gulf neighbor (Abu Dhabi), Dubai has long been the pioneer in terms of development and tourism infrastructure and seems to have an innate ability to create wonder, interest and enthusiasm (not necessarily in that order) from visitors and potential investors.
The raison d’être of most realized projects has been quality tourism, and at the beginning of its tourism curve in the late 1990s, mass tourism was merely baulked at. Meetings, incentives and business tourism were the buzzwords and the focus. It was five-star or no-star, concepts had to be different or tourism leaders were indifferent. And the only groups welcomed were those of the business variety.
State-of-the-art meeting facilities were the staple of all new hotels, and independent venues were introduced to accommodate large-scale meetings, events and exhibitions.
Fast-forward 10 years, and the tourism landscape has transformed along with the city’s skyline.
Over the last few years, Dubai became captive to its own success as it played catch-up to a supply and demand in-equation and became the “it” destination for the leisure market.
The independent travel segment was booming and soaked up available hotel guest room stock, leaving little in the way of additional capacity for meetings and incentives. When rooms were available, they also came at a price. For the last five years, the destination has ranked among the world’s top locales for hotel occupancy and revenue per available room (RevPAR) in Smith Travel Research’s Hotel Benchmark Survey, and that does not make for good bedfellows with the meeting industry.
However, there has been a sea change over the last six months.
“While initially the UAE thought it could escape the credit crunch, it soon became obvious that, as part of a global economy, this region would also be impacted,” Hackett explained. “Since Dubai is the most dependent on foreign investment and is the primary regional headquarters for international businesses, it has suffered the most.
“As a consequence we have noted a turndown in both international client activity and to a lesser degree among local businesses and government departments.”
Prime source markets for both leisure and business tourism have been the U.K., Germany and other European countries. But currency fluctuations have made the destination 19 percent more expensive than just six months ago for the Euro-zone and 27 percent more expensive for British travellers.
Combine this with a global recession, rapidly increasing room stock as new hotels come on stream and more competition from Gulf neighbors, and it is not too surprising that things have changed.
However, few hotels have dropped rates below 35 percent (as of April) and beach properties and some key city hotels are still recording high occupancy levels. Prime beachfront hotels are even at full capacity.
“The situation is not as bad as some people think,” explained Yigit Sezgin, regional director of sales and marketing for Rezidor Hotel Group. “Yes, there is an adjustment in the market, but that is due to changing conditions internationally as well as regionally. Global hotel groups are faring well as they have leverage in all key markets and are able to adjust their strategies and bring in assistance from other destinations. The local operators are struggling to a greater extent.”
Rezidor properties in Dubai are now targeting more regional business from the meetings sector, Sezgin says.
“There has been a decline in the more traditional European source markets, but this is being replaced by greater interest from businesses within the region that are perhaps looking at holding meetings closer to home, keen to meet with their counterparts in other Gulf countries and learn how they are coping with the new economic landscape.”
The Gulf States are all growing commercial hubs that have seen a huge amount of growth over the last five to 10 years. Dubai has been particularly active with the setup of specialist economic zones dedicated to particular industries.
This development has created a burgeoning domestic and outbound meeting industry that was once fully reliant on inbound international business.
One sector that is very much international, but still at a fledgling stage of development, in Dubai is convention business—the holy grail of the meeting industry.
“As we are currently bidding for congresses four to five years in advance, this market has not yet been impacted by the crisis,” said Natasha Tomé of the Dubai Convention Bureau (DCB). “We are still proactively bidding for—and winning—large association congresses. We recently won the HUGO annual conference for 2011.”
And there are some positive repercussions of the crisis when it comes to pricing.
“Clients who previously thought Dubai was too expensive are now taking a second look and asking for new quotes to hold their events here,” Tomé said.
The DCB is also stepping up a gear to assist the generation of future business.
“We’re very busy with a lot of inquiries from new and previous clients and have a new head of sales who started in early March, which helps us provide the level of service required for international planners.”
Far from being worried about the new market conditions, the DCB also sees this as an opportunity.
“The increase in room availability and rates, which are more attractive to association congresses, has helped Dubai’s position as a meetings destination,” Tomé said.
One of the Gulf’s leading DMCs and congress organizers, Net Tours, has observed a marked decline in business so far this year.
“We have been impacted by the economic crisis with business on all levels being reduced by an average of 25 percent to 35 percent since January. As a matter of fact, we have also revised our yearly budget and continue to do so,” said Ali Abu Monassar, executive chairman of Net Group.
Echoing comments made by Rezidor’s Sezgin, Net Group has also identified some changing market dynamics.
“As many incentive and business travel events have been cancelled or postponed, we have had to find new trends that can somehow compensate the gap. We have done this by giving attractive packages to the GCC and new emerging markets that never would have been able to come to the UAE before. We are also concentrating on association business for the future and doing a lot of research on this.”
Along with changes in focus for the industry, competition has become more cutthroat and the value of key relationships is being recognized to a greater extent than ever before.
“Naturally everybody is trying to get business at any cost,” Monassar explained. “But suppliers are more helpful and flexible regarding prices and adding value. Clients are also very demanding and use the crisis as an opportunity to extract as much benefit as possible for themselves.”
A slowdown in the booming tourism industry has also presented an opportunity for reflection.
“It is important that sometimes you stop and evaluate your actions,” Monassar said. “We always draw benefits from any situation, and the best of this crisis is that it has brought the industry back to a point where it can challenge and find ways to be cooperative and understand the overall market situation. We now have time to think before doing things. Before, there was no time and everyone was in rush.”
Pole Position
As the richest of the United Arab Emirates and tourism champion in-waiting with the advent of its first Formula One Grand Prix race in November this year, Abu Dhabi is the Gulf destination capturing the spotlight.
No stranger to business visitors as this has always formed the core of the destination’s tourism offering, Abu Dhabi has fared better than most during the current crisis, even posting a rise in RevPAR for the first quarter of 2009 compared to the same period last year (US$280 to $315).
Occupancy rates have been affected, but a 6 percent drop from 87 percent to 81 percent isn’t prompting any panic reactions from hoteliers.
The Abu Dhabi Tourism Authority’s (ADTA) five-year plan anticipates 2.7 million visitors by 2012, double the existing number, and with current demand outstripping supply as hotel rooms number less than 15,000, there is no reason to doubt its ability to deliver on these objectives. By 2013, room stock will have doubled to more than 30,000.
“Business is at the heart of Abu Dhabi’s development plans, and it is no coincidence that the Abu Dhabi National Exhibition Centre (ADNEC) was one of the first major projects to be introduced in the emirate,” explained Paul Vincent, marketing director for the ADNEC. “This facility is an economic driver, bringing in business people from a variety of industries—visitors from across the world that will return with their families at a later date.”
The next phase of development for the facility includes a dedicated convention center to accommodate major meetings and supplement its already extensive product offering for large-scale exhibitions and conferences.
With a dedicated MICE division and a presence at most specialist international meeting industry shows, the ADTA has a concerted strategy to court this tourism segment.
“Business tourism, whether from the MICE sector or from people coming to the emirate to conduct business, currently accounts for 80 percent of our hotel guests,” said Mubarak Al Nuaimi, international promotions manager for the ADTA. “The importance of this segment cannot be underestimated.”
Alexander John, director of business development for MCI, which represents several associations in the Middle East and organizes meetings throughout the UAE and the wider-Gulf region, commented that his company has seen an increased demand for Abu Dhabi as a potential destination for meetings of all sizes.
“We recognized the potential for Abu Dhabi three years ago and set up an office there. This is clearly an emerging destination and we are receiving a constant stream of requests for events, especially around the Formula One Grand Prix. Associations are also showing more interest in the destination. In the last week of April, we hosted 16 U.S.-based associations that are looking at the UAE as a destination for their future congresses.
“Business from within the region is looking positive and we are just about to sign off on a regional medical congress for Abu Dhabi in 2010,” John said. “The regional corporate market is also now looking at other destinations within the Gulf where there are greater business opportunities, especially as alternatives to Dubai.”
But John says clients are overall less willing to commit to projects because they have longer internal processes due to the global economic crisis.
“The need for ROI has become greater with lesser funds, and clients are choosing the most profitable channel to communicate to their community,” he said. “There also seems to be more central control over events, with tighter budgets and a lesser number of executions.”
On the supply side, cooperation is of paramount importance and many suppliers are experiencing the same fallout, with a decrease in market activity.
“Hotels are more accommodating, and summer rates have kicked in earlier,” John said. “Other suppliers are cutting costs to accommodate lower budgets. However, quality is not compromised as this remains a prerequisite of all clients when executing events.”
Rising Star of the Gulf
Qatar emerged in the late 1990s as a latecomer to the regional tourism scene, owing to the discovery of vast natural gas reserved in the mid-1980s that enabled vision to become reality.
Since this time, the Gulf state has focused its attentions on business tourism, building a world-class infrastructure to rival that of any major city and dwarfing the facilities of competitors from within the region.
Qatar is looking to distinguish itself from other regional centers as a meeting destination by focusing on developing key sectors of its economy including energy, healthcare, education, science and sport, with a specific focus on targeting high-profile government and association meetings involved with these sectors.
“Qatar is not trying to be all things to all people. Where it has aligned its focus is in being progressive in its outlook and developing a knowledge-based economy,” explained Ferry Lee, corporate marketing manager for the Qatar MICE Development Institute, an initiative established by the Qatar Foundation specifically to drive the events industry in Qatar. “Qatar is working to develop certain industry sectors, through events and knowledge transfer, bringing the leaders of these industries to Qatar to help develop these sectors.
“You could say that while Dubai delivers the ‘Vegas experience,’ Qatar looks at its importance in the global, political arena. It plays host to a lot of United Nations events, UNESCO events and events such as the Arab League and the Doha debates. So the content tends to be of a much more serious nature, and the delegates who attend those events are there for a meeting of minds.”
Qatar currently boasts just one convention center: the Doha Exhibition Centre, run by the Qatar Tourism and Exhibitions Authority (QTEA), which opened in February 2008. In its first year, the 50,000-square-foot facility welcomed 500,000 visitors and played host to more than 20 international exhibitions.
Two larger facilities are in the pipeline for 2011. QTEA will move into the Doha Exhibition Centre and Tower, featuring a 112-storey iconic tower and adjacent exhibition center, with 147,000 square feet of showcase space. The Qatar National Convention Centre (QNCC)—located in Education City, Doha’s hub for education, science and research—will feature 131,000 square feet of exhibition space, a 2,500-seat auditorium, a 500-seat theatre and a multipurpose hall for conferences.
While the extra capacity won’t come on stream for at least two years, the time lag fits into Qatar’s game plan perfectly—when it comes to the meetings business, Qatar is playing a long game. A recent industry survey conducted by The Gulf Incentive, Business Travel & Meetings Exhibition revealed that the associations market was placed way out behind the corporate and public sectors for regional suppliers when it came to pitching for meetings business, but Qatar is bucking this trend by heavily targeting this sector.
“We have done a lot of research into the association market. This business is really ripe for the picking to come to the Middle East. They have a set rotation—they usually go to Europe, North America, Asia Pacific and then somewhere else—and a lot of them are looking for new destinations. The majority of associations haven’t been to the Middle East, so this is a unique opportunity to bring that business here,” said Sue Hocking, director of sales for QNCC.
Lee agrees that this strategy to target association business will pay dividends for Qatar in the long run.
“Even if we had a big congress to run tomorrow, Qatar isn’t quite ready yet, but in the next two to three years, which is the bidding cycle for these large-scale events, it will have everything in place. That’s why it’s very focused on convention activity—understanding what associations need, what an industry sector would want to get from a congress and what the destination can offer.” One+
ROB NICHOLAS heads up Nicholas Publishing International, producer of publications such as the bi-monthly meetme (Meet Middle East) magazine and annual destination guides meetdubai, meetabudhabi, meetoman, meetjordan, meetegypt, meetqatar, meetbahrain, meetmorocco and meetsaudiarabia, all accessible online at www.meetmiddleeast.com.
Regional Round-up
The meeting industry in other member states of the Gulf Cooperation Council is in various stages of development and health.
Saudi Arabia has the greatest potential in terms of intra-regional business owing to its sizeable population base and industry strength—not only in the fields of oil and gas but also in terms of banking, finance and medical. The Saudi Supreme Commission for Tourism and Antiquities claims that the effect of the current crisis has been minimal on domestic meetings, but is looking at the current situation as an opportunity to bring more regional meetings to the destination.
Meanwhile, Bahrain does not intend to be left behind in the quest for conventions business and claims that the meeting industry is holding up well in the current crisis.
“We have had two postponements but still within the same year, 2009, and have had no outright cancellations at all,” said Debbie Stanford-Kristiansen, acting CEO of the Bahrain Exhibition and Convention Authority. “We are also very fortunate to still be receiving daily enquiries for events in 2009, 2010, 2011.”