Aviation and transport
In 2012, more than 51 million passengers travelled through Dubai International Airport (DIA), serving 220 destinations via 150 carriers. Even so, the emirate’s main transport hub is undergoing extensive redevelopment and expansion to accommodate the influx of millions of international visitors that will come with hosting Expo 2020. According to the organiser’s forecasts, over 17.5 million people will flock from around the world to visit Expo 2020 in Dubai, or up to 300,000 every day. This is not to mention exhibitors from more than 180 nations.
Preparations are already well under way for this, with aviation authorities busy expanding and upgrading existing air infrastructure. DIA is currently undergoing $7.8bn of renovation which will eventually allow the facility to cope with 90 million passengers per year. The improvements include the construction of Concourse 3 and Concourse 4 and expansions to Terminal 1 and 2.
“If you look at the airport today, it is going to surpass its passenger goal for 2013 quite handsomely. Next year, it will eclipse Heathrow as the second busiest airport in the world,” says Saj Ahmad, chief analyst at aviation consultancy StrategicAero Research. “That's before you consider the several billion dollars earmarked for expansion at the airport.”
To add to its existing hub, Dubai is also placing the finishing touches on the new Al Maktoum International Airport at Dubai World Central, just a short journey from the proposed Expo 2020 site in Jebel Ali. With an eventual capacity of 160 million passengers per year, the airport will easily surpass London Heathrow to become the largest in the world. Passenger operations are due to start at Al Maktoum in October this year, with Dubai’s Emirates Airline expected to make the move to the hub sometime around 2015.
Analyst Ahmad says that rival host cities for Expo 2020 in Russia, Brazil and Turkey come nowhere near to matching Dubai not only in terms of their airports, but also their geographic location and flag carriers.
“With Emirates in particular, leveraging Dubai's unique geographic location to pull in and take traffic through Dubai, the other candidate cities do not even have a flagship airline capable of doing the same,” he adds.
Tourism and hospitality
Dubai welcomed more than 10 million international visitors for the first time during 2012, according to official estimates, representing an increase of over 9 percent compared to the year before. Not only this, but Dubai’s hotels reaped a bumper AED18.82bn ($5.12bn) in revenues, a 17.9 percent year-on-year hike.
This is just the start of the glitzy emirate’s tourism push, however, as by the time the Expo is held in 2020 Dubai means to have doubled its number of visitors to 20 million annually. Much of this ambition will depend on whether it is awarded the rights to host the event come November.
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Given that the Expo would be held over six-month period between October and April, one analyst believes that the positive impact on the emirate’s hospitality sector will be enormous, and even surpass that of the World Cup 2022 in Qatar.
“If Dubai wins the chance to host this event, I would expect the impact to be significantly greater for Dubai than hosting the FIFA World Cup would be for Qatar,” says Guy Wilkinson, managing partner at Dubai-based hospitality consultancy Viability.
Figures from Dubai authorities estimate that winning the rights to host Expo 2020 will create a whopping 111,000 new jobs in the hotel and restaurant sectors.
Much of this work will be created by the new hospitality projects due to come online between now and 2020, including the more than 100 properties planned as part of the Mohammed Bin Rashid City megaproject.
Research by PKF based on data from previous Expo events shows that an additional 20 percent of annual international guest arrivals would come to Dubai over the six months period attracted by World Expo 2020.
PKF also predicts that hotels during the period will operate at more than 90 percent capacity, putting pressure on room inventory. However, a spill-over effect would benefit hospitality sectors in neighbouring emirates such as Abu Dhabi, PKF said.
A key pillar in Dubai’s Expo 2020 bid is the site in Jebel Ali itself, which will encompass 438 hectares and will be developed with a raft of new hospitality and tourism amenities. One question that the emirate must address is the legacy of this infrastructure, namely what it will be used for once the event has closed. Analyst Wilkinson says that this is one area that Dubai has a track record of success in.
“Whatever is built for Expo 2020 must have a purpose beyond the event, and Dubai has proven itself well able to create new projects and districts that prove sustainable — just look at Al Barsha, which has grown up around the Mall of the Emirates since 2005, and is now a buoyant and thriving community,” he believes.
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Real estate and construction
Following the emirate’s property market crash of 2008-2009, which saw prices fall by up to 60 percent, Dubai’s real estate market has rallied in 2013 on the back of strong economic fundamentals and a rising population.
According to a recent report by Standard Chartered, average property prices in Dubai have risen by more than 30 percent in the last 12 months, which the lender attributed partly to anticipation over the possible hosting of Expo 2020.
“Expo 2020 [will] be a meaningful contributor to the sustainability of the housing market, in the event of a positive bid result in November 2013,” the report read.
Of the 300,000 or so jobs that are expected to be created by a successful Expo bid, Standard Chartered forecast that approximately 90 percent will come between 2018 and 2021. The lender predicted that many of these are anticipated to be turned into permanent positions, creating further demands on the emirate’s housing supply and further pushing up prices.
This perspective was backed by a research note issued by Fitch in September, the ratings agency said the final decision about the venue of the World Expo 2020 will have an impact on the medium and long-term supply and demand balance in Dubai.
Soaring property prices in the wake of a successful Expo bid is not without precedent. In the 12 months prior to hosting the 2010 event, Shanghai saw its real estate values rocket by as much as 68 percent, leading the city’s mayor to introduce new tax and regulations in order to cool the market.
The awarding of the event in Dubai could also help spur a new construction boom in the emirate, which saw numerous projects scrapped or stalled during the last downturn.
The Expo site itself, to be located in Jebel Ali, will sprawl across 1.2 million sq m and house around 180 purpose built pavilions. The masterplan for the site will not receive approval until the end of 2015, with work expected to commence shortly afterwards with completion for 2019.
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According to a research note from Bank of America Merrill Lynch, it is anticipated that the Dubai government will spend about $6.8bn on building works to improve infrastructure in the run-up to 2020. Overall, about 80,000 new jobs in the construction sector will be created, it is estimated.
Banking and equities
At the time of writing, the benchmark Dubai Financial Market General index had risen 75 percent in the year-to-date on the back of improved economic indicators and rebound in the emirate’s property market.
This increase can also partly be attributed to investors making bets on stocks based on a successful bid by Dubai to host Expo 2020. Those that have gained most are those likely to benefit most from the event, namely companies in sectors including transport, construction and real estate.
“The market has already gone up massively this year, including many of the companies that could benefit from the Expo,” Ali Adou, portfolio manager at The National Investor, an Abu Dhabi investment firm, told Reuters in late September.
Stocks that have shown tangible gains in the year so far include Dubai Investments, a conglomerate with far-ranging interests from glass making to Islamic re-insurance; local construction firms Arabtec and Drake & Scull International; and budget airline Air Arabia. Others such as Emaar Properties, with wide holdings in hospitality and retail, and logistics giant DP World would also be in the frontline to profit from a successful Dubai bid.
However, it is not yet clear over what kind of boost to share prices the rights to host the event will give the bourse going forward. “There will be upside going forward, but it will be limited for the short term. In the medium term, you have to position yourself anyway for the new economic growth cycle in Dubai and Abu Dhabi,” Adou added.
There is precedent for local bourses rising sharply in the weeks before and after a country is awarded the rights to host a major event. In 2010, Qatar’s stock market increased 16 percent in the months prior to its winning World Cup 2022 bid, with the exchange rising a further 14 percent in the following weeks.
Long-term gains are anything but guaranteed though. In the months after Expo 2010 closed in Shanghai, a number of large-cap stocks on the local stock market returned to their pre-Expo prices following a temporary spike.
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