Now is the time for Nakheel to chase the budget market

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One of the joys of living on the Palm Jumeirah is that you can drive in and drive out in record time. No traffic, no chaos, no frustration. Plenty of places to park for free. Plenty of spaces are people-free.

Great as this may sound, there is a flip side and worrying side: not many people are going there. While any visit to Dubai Marina or Downtown Dubai is steeped in chaos and crowds, the Palm Jumeirah, by comparison, is a desert island. No shopping mall (one to come in 2016), limited entertainment and, as has been well documented, many residents are even banned from using their own beaches.

But now, I would suggest, is the time for developer Nakheel to have a complete strategic rethink. And one that could within three years make the Palm Jumeirah not just one of the most famous places on earth, but one of the busiest (and money-spinning) on the planet.

The spark — in case Nakheel hasn’t noticed — is the decision this week to allow Byblos Hospitality to build a new 144-room low-cost hotel on the islands. It may look out of place next to the One & Only Royal Mirage, and at a total cost of $50m, worth less than the nightclub in the under-construction $1.7bn Viceroy Palm Dubai. But it is also a master stroke — for this is exactly what the Palm needs. Byblos Hospitality will build a new 144-room low-cost property, the first of this type on the islands.

Today, five-star hotel rooms account for nearly 62 percent of the total branded hotel inventory in Dubai. In the future supply pipeline of over 42,000 hotel rooms in Dubai also, nearly 50 percent are in the luxury and upper upscale segments. In other words, as an emirate, Dubai has clearly realised that a big part of its future lies in catering for short-term, more budget-conscious travellers (especially with Expo 2020 just six years away).

This is exactly why Emaar teamed up with Meraas Holding last year to launch its economy hotel brand Dubai Inn. And why its launch of the relatively lower cost Vida Hotels and Resorts brand in Downtown Dubai has been such a success. Emaar chairman Mohamed Alabbar, famed for the brilliant Address and Armani super-luxury hotels, was smart enough to spot the big gap in the budget market some time back, and the fact that given the much lower construction costs and running costs — coupled with high occupancy rates, the returns on investment can be far greater than on a global icon.

With close to 67 million passengers passing through Dubai International Airport last year, and 100 million expected by 2020, Emaar — and its Dubai Inn brand — stands to benefit hugely.

But Nakheel, given it owns one of the most sought-after tourist destinations in the world, could do the same by not stopping with Byblos, but launching its own low-cost hotel brand and rolling it out across the Palm Jumeirah. I see no reason, given the huge spread of land, why even seven more cannot be added. With that would come the F&B outlets sought after by short-term visitors, and even the great white elephant called the Palm Monorail could actually start to open its empty stations to passengers.

Now is the time for Nakheel to act. This month it confirmed the early repayment of its entire AED7.9bn ($2.15bn) bank debt, nearly four years before the final loan instalment due in March 2018. The master developer will pay 31 banks, including 10 from the UAE and 21 from overseas. Slowly but surely, long-suffering investors are starting to get (some) of their cash back.

And with the latest figures showing a first-half net profit of AED1.2bn ($327m), up 57 percent on the same period last year, it is back in the black. It is starting to look healthy again. Now would be a good time to roll out a completely new strategy to bring its landmark development back to life.

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Posted by: FWK

Doing new things sounds always more attractive than finalizing current projects. Have a look at Jumeirah "Park" and convince yourself that Nakheel would be better off to focus on the current project portfolio. I just can pray for the palm that they do a better maintenance than here in Jumeirah Park...

Posted by: talal

when will nakeheel develope the palm jebil ali project

Posted by: Lars Hansen

I would ask the author to carefully consider the large investments made on the Palm and whether the lack of confusion and the abundance of parking spaces will actually play well into the hands of Nakheel and deliver them more and more discerning clients.
In regards the monorail I believe it is essential when peak demand periods like New Year attract large crowds.

Posted by: Mono - Doh!

Sadly the monorail did not opearate at new year, further adding to the complete chaos that plagued the palm and ruined NYE for thousands of people.

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