A strategy for stormy times

With the real estate market in trouble, the need for tourism infrastructure and diverse leisure attractions has come to the forefront, according to Deloitte's Alex Kyriakidis.

With a man that has advised the tourism, leisure and hospitality industry during four recessions declaring the current global financial climate to be "by far" the worst he has ever witnessed, at first impressions, the future certainly does not sound bright.

"There's never been a recession that I've been through where you've got everything from a financial meltdown in the world markets to a deflationary environment to the dollar gaining strength and completely turning on its head the pricing of many destinations around the world, no money available from banks so no money to finance anything and equity markets crashing through the floor.

"We're heading into the perfect storm," concludes the totally frank Alex Kyriakidis, Deloitte Middle East's global managing partner for Tourism, Hospitality & Leisure, as he reveals a glimpse into the somehat ominous outlook for 2009.

As of this month, Kyriakidis has relocated from London to Dubai, a place he has been spending a lot of time recently. Leisure Manager caught up with him at Deloitte's Global Tourism, Hospitality &Leisure industry meeting, held at the end of last year at Jumeirah Beach Hotel, to find out the impact of the global financial turmoil on the region - and more importantly - the opportunities for the leisure sector amid this.

The region and recession

"Having been through four recessions in this industry and helped all the major clients around the world and governments cope with it, our conclusion was that it would make sense for me to come here because the word recession is not something that this region has met before," says Kyriakidis.

"We think that our collective global experience in helping an industry go through a recession is going to be of value to the region. That's why we're making the move to come here for a couple of years to help on the ground; to help the industry and the governments respond," he says.

Kyriakidis estimates that the impact of the financial crisis elsewhere won't be known in the region until the second half of the year, "starting around about April/May, after the first quarter".

While the positive and visionary outlook of the UAE and many other Middle Eastern countries - advocated by Tatweer Dubai CEO Khalid Al Malik - will be a good weapon during these times, clearly the region will need to rely on a lot more than rose-tinted spectacles to stay ahead of the game.

"The long-term development vision of the UAE must continue and current conditions should not cause panic. No one is immune from the global economic crisis," says Kyriakidis.

"The key is broadening the tourism offering to meet the needs of today's tourists."

Kyriakidis explains: "Until now we've had the benefit of investing in tourism-related product on the back of the real estate boom. What we're into now though is a different era. We're in an era where world over, real estate is in trouble, so I think for the foreseeable feature it's going to help everybody focus sharply on the tourism product itself - its viability and its profitability as a tourism product.

"What's going to really make the difference now is the whole industry in this region relying much more on the operational focus of these developments and evaluate them for what they are, that is attractions, hotels, F&B and entertainment for the consumer, absent the real estate. I think that's got to be very healthy for the industry because you are building a sustainable business."

Kyriakidis reveals that in terms of recessions, he follows a typical rule of thumb: "If we had 100 units in the pipeline, a third will continue and be completed, about a third will be delayed and about a third will fall away. But that last 30% that is going to fall away, I think it will be those projects that were marginal and the projects that were only going to work if the real estate was going to work".

People power

This bodes well then for the attractions projects already announced, from Dubailand in Dubai to Yas Island in Abu Dhabi. What does need a shift in focus, however, is the target markets that these developments are aimed at, continues Kyriakidis.

"If we're going to grow from seven million to 15 million visitors annually, we're not going to go and get another seven million luxury travellers because there are not that many luxury travellers for us to dominate and get in the door. We've got to therefore broaden our appeal here to be able to bring mid-market tourism to the UAE," he asserts.

READERS' COMMENTS

MORE FROM ARABIANBUSINESS.COM