EAHQ Newsletter 01

EAHQ January 2015 | Edition 01

In this Edition WELCOME FROM THE DEAN GROW TH OF THE LIFEST YLE HOTEL IN DUBAI MEGA PROJECT ANNOUNCEMENTS IN FOCUS: TOURISM AND HOSPITALIT Y GROW TH IN THE UAE ECONOMIC OUTLOOK CONSUMER TRENDS

Welcome Message from The Dean Welcome to this first edition of the Emirates Academy Hospitality Quarterly.

The publication is intended to provide a quarterly snapshot of research, trends and statistics potentially impacting on the hospitality industry in Dubai and the wider GCC. Through the provision of regular updates we intend to inform decision makers in industry, academics and students about key trends and

THEME PARK EXPANSIONS

contemporary developments in the region. This first edition has a special focus on lifestyle hotels and theme parks, two areas of development that will have a profound impact on the nature and scale of regional tourism.

Formed in 2001 we now have graduates working in senior positions across the global industry and we have developed significant research capacity through our highly qualified faculty.

The Emirates Academy of Hospitality Management is the leading regional provider of internationally accredited Business Education with a clear focus on the Hospitality Industry.

For further information about our university do look at our website or contact me directly by e-mail at:

IN BOUND MARKETS: RUSSIAN DOWNTOWN MILLENNIAL TRENDS Editor Angela Anthonisz, Senior Lecturer Research Associate Conrad Sokolnicki

stuart.jauncey@emiratesacademy.edu

Growth of The Lifestyle Hotel in Dubai Lifestyle brands have become a global phenomenon with many of the major hotel chains investing in developing their brand portfolios to create new concepts aimed at the increasingly discerning and experience driven consumer.

Most recently Hilton has launched ‘Canopy’ , Hyatt has ‘A ndaz’, IHG has launched ‘EVEN’ and Marriott has ‘Edition’.

These lifestyle brands aim to enhance the guest stay via the provision of items such as healthier menus, environmentally friendly alternatives and the promise of a unique hotel experience.

Dubai, with its established reputation for luxury, already has a number of hotels in the lifestyle category with the likes of Armani, Aloft and Vida and it

can be expected that in amongst the 44 new brands entering the emirate between now and 2020, several of these will be lifestyle oriented.

New players in 2015 include W

by Starwood, Versace and Manzil

by Emaar, with Bulgari and the recently announced Venu by Jumeirah in the pipeline.

However, as the competition increases and the hotel industry diversifies on the run up to EXPO 2020 the creation of a lifestyle brand may not mean that a hotel will automatically attract customers.

Hotels in the region will need to focus on combining unique hotel properties with well trained and conscientious staff if they are to create a truly individualistic and unique experience that will keep the customer coming back.

January 2015 | Edition 01

IN FOCUS: Tourism & Hospitality Growth in the UAE The announcement in November 2013 that Dubai had been selected to host the EXPO 2020 has provided an immediate boost to the economy of the UAE and improved the global image of the destination.

When combined with the UAE’s national tourism strategy of increasing international and domestic tourists and the region’s reputation for political stability, 2014 has been a successful year overall.

This has subsequently fueled growth in a number of new tourism and hospitality related projects and while the majority of these are located in Dubai and Abu Dhabi, the growth of the industry can also be seen in the other Emirates with new projects announced in Sharjah and Ajman.

The tourism and hospitality landscape saw a number of important changes in 2014 and the

development of a much more diversified hotel sector which includes a drive for more midrange hotels and a significant increase in lifestyle concepts; the creation of a new DTCM hotel classification scheme aimed at accommodating a number of new hotel categories; a focus on wellness and medical tourism as a move-away from the traditional leisure market; and the launch of a number of new visitor attractions such as the Dubai Mall of the World and the announcement of several new theme parks.

Despite a cautious start to the year in light of changes in the global economy and the recent fall in the inbound Russian market in January the outlook for tourism and hospitality in 2015 is still positive with BMI anticipating further increases in tourist arrivals and receipts, which are well above the World Tourist Organisation’s global average of 4% growth.

Economic Outlook STR’s Report on Hotel Industry Performance in the Middle East in December 2014 showed an increase in RevPAR, ADR and Occupancy rates across the region, compared with the same period in 2013.

For the UAE Occupancy rates were up 0.1% to 77.1, ADR was up 2.6% and RevPAR up 2.7%.

Abu Dhabi continues to demonstrate strong growth with figures for December showing an increase in Occupancy of 9.8%, ADR up 9.7% and RevPAR up 20.5% on the same period in 2013.

Dubai is the leading city in the region again, continuing to see above average occupancy rates over the course of the year. While there has a been a slight dip of 1.5% in occupancy for December caused by the slump in the Russian market, this is slightly compensated by increases in ADR, up 2.4% on the same period in 2013 and RevPAR up 2.7%.

As we enter 2015 the industry outlook is one of cautious optimism with Dubai forecast to be one of the strongest cities in terms of revenue growth in the UAE this year.

January 2015 | Edition 01

Consumer Trends in 2015 • Consumers want their purchasing experience to be as convenient as possible. Time is a valuable resource for the modern consumer and they are more willing to buy products that optimize the use of this resource.

• As always, being ìgreenî is a trend that is still in fashion, however 2015 will reveal that consumers also look for companies who consider womanís rights issues as well as mixing in designs centered on morality and politics.

• Shopping as a main activity while travelling will be on the rise this year. This is especially true for Chinese travelers, with reports showing that 27% of Chinese tourists abroad spend more on shopping than on anything else.

• Offering online privacy is a key selling point that appeals to consumers.

Using a strategy that is privacy friendly can be a winning technique in 2015.

• The millennial generation continues to shape both company and consumer relationships. See the feature on millennial trends for more details.

IN FOCUS: Tourism and Hospitality Growth in the UAE In its ongoing bid to maintain its attractiveness and diversify its appeal as an international tourism destination, Dubai has embarked on a wave of new investments in theme parks and theme hotels.

IMGís Worlds of Adventure, a 1.5 million square feet indoor entertainment destination worth USD 1billion, is nearing completion.

In 2014, H.H. Sheikh Mohammed Bin Rashid Al Maktoum approved AED 10 billion towards the development of five new theme parks in Jebel Ali to be headed by Dubai Parks and Resorts (DPR), a subsidiary of Meraas.

DPR launched the first stage of the development consisting of three of the five theme parks:Motiongate Dubai, featuring rides and attractions based on the DreamWorks animation movies; Bollywood Parks Dubai, focusing on the Bollywood Industry and Legoland Dubai, the first park of its kind in the region. Additionally, the development will feature leisure facilities and a family oriented hotel. At the end of last year DPR announced an IPO on the Dubai Financial Market (DFM) intended to help finance the mega project. The IPO was welcomed and supported with talks of confidence in the company’s performance on the DFM. However, the day before the IPO investors had worries about DPR’s performance as a result of falling oil prices.

The worries held through as DPR disappointed investors with a 9% slump in share value on the first day of trading. Irrespective of the lackluster performance, 35% of the infrastructure work and 45% of utility services were already complete on the project at the end of November 2014.

Furthermore, Paul La France, Chief Projects Officer for the development, confirmed that the project was on budget. The park complex is expected to be completed by 2016 and is anticipating welcoming 6.7 million visitors in its first full year of operation during 2017. Although DPR had a shaky start, theme park developments can mean big business for hotels built in and around their location.

Colliers International Reports that the global average length of stay in a theme park hotel is 3 nights, with inner-circle theme park hotels showing up to 10% higher occupancy rates compared to outer hotels.

Theme park hotels also require more food and beverage outlets than non-themed hotels creating more jobs and more B2B business arrangements. When operational, the theme park projects in Dubai will provide another unique offering for the 20 million tourists Dubai hopes to attract annually by 2020.

January 2015 | Edition 01

Mega Project Announcements • USD 32bn is to be invested in the Al Maktoum International Airport for further expansion, allowing the airport to handle over 200mn passengers in approximately 10 years time.

The project will take 6-8 years to complete.

• With the EXPO set to run from October 2020 to April 2021, Meraas Holding has released a plan to build three theme parks near the EXPO site. See the feature on theme parks in this issue.

• Emaar Properties and Dubai Holding have launched their plans to jointly develop the Dubai Creek Harbour at the Lagoons. This mega urban district spanning 6.5 million square metres will house 3,664 office units, eight million square feet of retail space, 39,000 residential units and 22 hotels with 4,400 rooms. Located along the Dubai Creek next to the Ras al Khor area, the development will also feature the ‘Dubai Twin Towers’ which are planned to be the tallest in the world.

• Damac Properties has announced the launch of Akoya Oxygen a golf-centered mega project in Dubai Land. The 55 million square feet project will include residential areas, luxury retail, hospitality and wellness areas, and a golf course designed by Tiger Woods.

• Investment Corporation of Dubai released their plans to build the AED 5.14 billion Royal Atlantis Resort and Residences. The 46 storey development next to the existing Atlantis, on The Palm will host 800 hotel rooms, 250 luxury apartments, and a sky pool 90 meters above the ground.

• Dubai Holding has announced the AED 25 billion Mall of the World complex set to break ground early this year. Located on Sheik Zayed Road the complex will cover a total area of 48 million square feet and will include 100 hotels (20,000 rooms). The first phase of the project is expected to be complete in by 2018

Inbound markets Russian downturn Dubai hotels and tour operators are currently feeling the knock-on effect of the falling value of the ruble and a slump in oil prices. Demand from the Russian market is nearly 50% down on the same period last year while DXB saw an 8.2% y-o-y decline in passengers from Russia and CIS countries in October 2014.

The Russian market, with over 400,000 visitors last year, is Dubai’s fifth largest source market. The real impact of the slump in visitors will only truly be seen in the coming months as the majority of Russian tourists come to Dubai during the winter season to attend the Dubai Shopping Festival and as they take time off for Orthodox Christmas and New Year. In 2013, Russians were amongst the highest spenders in Dubai according to VISA, with more than USD 82 million charged to credit cards in 2014, up from USD 61.3 million the year before. Reports however show that it is the middle and upper-middle income segments that are most affected while companies working with charter flights and larger tour operators have seen sales decline by 30% or more. The high-end travelers however are still keen to book lavish hotels with average spend at USD 30,000 per booking.

Despite financial concerns, the Dubai government is still investing heavily in their Russian marketing efforts and views the country as ‘a key source market for the long term’.

Millennial Trends Described as indecisive and self-promoting, millennials (those people aged between 12 - 32) now add up to 2.6 billion people globally. Recent trends released by Euromonitor indicate that this group cannot be ignored, either as potential customers, or as potential employees and is likely present the hospitality industry with a number of challenges. These trends include the following: • Millennials are increasingly concerned about their digital privacy and are more aware of their digital footprint.

• They are careful about what information is released to their parents, to their employers, and to their colleagues.

• The segment is considered to be ‘savvy’ when shopping, risk-averse, and socially conscious. They expect companies to launch responsible and impactful programmes to meet their high standards. They make fewer purchases of cars and homes, but rely heavily on technology to find them the best prices on fair-trade and responsibly manufactured items.

• Millennials in general have less cash to spend and are reluctant to spend what they do have.

In the US a third of 18-34 year olds still live with their parents. Higher youth unemployment and massive student debt means millennials are often delaying major milestones. Traditional purchases for the home or children are subsequently declining and companies now need to market to and approach millennials on their own terms.

As the most diverse and educated generation ever, millennials in the workplace are also showing specific characteristics. They are great at team work and have a ‘can-do’ attitude, but they also feel entitled to constant online access, a life away from work, and always expect variety in their job role.

January 2015 | Edition 01