By Lee Jamieson
Global hotel brands preparing to set foot in Northern Emirates may become destinations in their own right.
As several global hotel brands prepare to raise their flags in the Northern Emirates, these areas are set to become destinations in their own right reports Lee Jamieson.
After many years of living in the shadow of the UAE's major cities, the Northern Emirates are finally in the international spotlight.
Global hotel chains have suddenly recognised the region's untapped potential: unspoiled landscapes, white sandy beaches, a strong sense of cultural identity, the preservation of local history and some of the best marine life in the region.
This all adds up to an unexploited tourism product that is differentiated from the Dubai experience, yet still within easy reach of the major cities.
The Northern Emirates are a relaxation refuge for visitors and tourists.
"The Northern Emirates are definitely emerging as a new destination in the UAE," says Hospitality Management Holdings CEO Michel Noblet, "and the region's greatest assets are its dynamism and diversity."
"The Northern Emirates are a relaxation refuge for visitors and tourists," adds Hilton Hotels vice president of operations, Arabian Peninsula and Indian Ocean, Essam Abouda. "With major tourism infrastructure projects currently underway, we are attracted by the untapped potential, and are committed to developing it into a world-class destination. It will provide an alternative choice for visitors to the UAE." New Possibilities
The charm of the Northern Emirates has long been appreciated by local leisure travellers looking to escape the hustle and bustle of Dubai and Abu Dhabi. More recently however, the region has shown strong signs of growth as an international leisure and business destination.
"Currently, we are strong in local and ex-pat leisure travel from across the region," explains Hotel JAL Fujairah Resort and Spa general manager Christian Rainalter.
"Many come from Dubai in search of quality family getaways and dinning experiences. Local corporate business events are also performing strongly here. Recently, we've noticed a steady increase in our overseas leisure clientele, especially from Europe."
While talk of an economic slowdown in Western Europe may have slightly dented the arrivals numbers from this region, Eastern Europe and Russia have since become buoyant markets.
"In Sharjah especially, we've seen some geographic movement between Eastern and Western Europe," confirms Rezidor regional director of sales and marketing Middle East Craig Senior. "One has replaced the other quite nicely."
Over the last few decades, the Northern Emirates have been dwarfed by the success of Dubai and Abu Dhabi. The region had become the forgotten paradise of the UAE, with comparatively little hospitality investment or interest from major hotel brands. It is therefore fitting that the success of the major cities is now set to reinvigorate the area.
"The phenomenal growth of the hotel business in the emirates of Dubai and Abu Dhabi is finally spreading north and raising the profile of the Northern Emirates," says Al Diar Siji Hotel Fujairah general manager, Fouad Melhem.
"For example, Fujairah has experienced rapid economic growth and tourism development with the recent opening of luxury hotels on the beachfront."
Melhem is not alone in his enthusiasm: hoteliers across the region report solid growth and seem confident that the increase in supply is proportionate to the increase in demand - and with such solid infrastructure investment into the region, demand shows no sign of softening.
"I think that you only have to look at the airlift coming into Dubai, which is continually increasing," explains Senior.
"If you look at the expansion plans of Emirates and Etihad Airways, they are growing their hubs in Abu Dhabi and Dubai and purchasing more A380 aircrafts. The Northern Emirates will naturally benefit from this expansion.
"Not everybody wants to stay in Dubai or spend time in the mega shopping malls - The Northern Emirates offer a completely different concept that can be easily combined with the Dubai experience."
The Northern Emirates have played the poor relation for so long that it has become difficult for these destinations to compete for international exposure. Despite some aggressive PR work from individual hotels and the local tourism authorities, competing against the mammoth marketing machines of Dubai and Abu Dhabi has been almost impossible.
"This has been our greatest challenge in Fujairah," explains Rainalter. "Many don't know where we are exactly or what we have to offer despite the relative ease of access from the surrounding Emirates and GCC counties. However, I do think that this lack of recognition is beginning to recede."
Although the Northern Emirates are on the brink of a massive expansion, nothing can be achieved without a solid PR drive to heighten the awareness of the destination as a whole, not just the individual properties operating there.
Mövenpick Hotels & Resorts vice-president sales and marketing Middle East, Toufic Tamim warns that hotels in the region need to invest heavily in their PR operations if the region is to fulfil its potential: "PR is one tool in the marketing mix that gives the best return on investment and is the most cost-effective.
We are not simply talking about the ubiquitous press release here but a well-orchestrated campaign that includes well-placed and attractive editorial pieces and a highly targeted reach."
With giants like Mövenpick, Rezidor, Accor, Rotana and Hilton all developing properties in the near future, existing hoteliers in the Northern Emirates are sure to benefit from their far-reaching PR operations - ultimately, it is the introduction of the big brands that will enable the Northern Emirates to emerge as a serious tourism destination. Freshblood
Room capacity across the Northern Emirates is expected to double by 2010 and many of the global brands are committed to expanding further throughout the region in the long-term. Broadly speaking, the increased supply has been welcomed by both hoteliers currently operating and developers of future properties. They are confident that rapid expansion will increase demand proportionately.
"In the areas where we're developing, Fujairah and Ras Al Khaimah, there's a very limited nucleus of five star hotels," explains Rezidor's Senior.
"If we get three or four competitors opening at the same time as us, it's ultimately good for the destination because we can increase market coverage and advertising awareness. This will all improve the visibility of the destination around the globe."
The future of the Northern Emirates’ tourism product lies in product diversification.
Although the expansion is still in its early stages, local hoteliers are already feeling its positive impact, as Melhem confirms:
"Some experts insist that the surge in supply will affect our occupancy, but I believe that this will coincide with an increase in arrivals. For the Emirate of Fujairah, for example, the entry of these four and five-star hotel brands has already helped to increase the awareness of the emirate as a holiday, business and tourist destination."
It is also hoped that expansion in the Northern Emirates will help foster more consistency across the UAE's hospitality industry which has historically been Dubai-centric and high-end.
Already, Rotana's newly promoted senior vice president UAE operations, Omar Kaddouri has set about bridging the gap between Dubai and the Northern Emirates.
"The breakdown between the Northern Emirates, Dubai, Abu Dhabi and Al Ain is now history," he says.
"My new responsibilities include the successful opening of our new properties in the UAE and the creation of synergy between the hotels in all aspects of our operations."
Creating a mid market
As the UAE's hotel industry matures and prepares for the arrival of mass tourism, an increasing need for mid-market accommodation has emerged alongside the demand for luxury hospitality.
The most interesting developments in this niche area are three new properties in the Northern Emirates by "value for money" operator, Premier Inn.
"The Northern Emirates are developing rapidly and there is a shortage of affordable accommodation - we aim to fill that gap," says Premier Inn Hotels managing director Middle East, Darroch Crawford.
"We believe that Premier Inn will create new markets, just as the low-cost airlines increased the frequency of travel."
Premier Inn will be competing with most of the other large operators to capture this niche market. Many of the hotel developers attracted to the region have plans to expand both geographically and across the star rating - a move that signals the beginning of a more consistent hotel industry in the Northern Emirates.
"The large development plans of Accor in the budget and mid-scale segments will most probably help de-fragment these market segments which today clearly suffer from a lack of consistency," explains Accor Hospitality Middle East managing director Christophe Landais.
"International operators have only been developing upper-market properties, and the mid-market hotels that can be found in the Northern Emirates are local and unbranded.
"Certainly, there will be winners and losers, but this is all part of a maturing hotel market. Ultimately, it is the customer at the end of the chain that will benefit from these developments in terms of pricing and value for money."
A new Dubai?
Considering the high number of operators moving into the region, it is surprising to find a shared vision from both existing hoteliers and developers.
Although "new Dubai" has become a common phrase to describe the Northern Emirates, hoteliers are cautious about the expression.
Certainly, it is in the interests of hoteliers to maintain close links with Dubai and Abu Dhabi's thriving hospitality scene, but the region has its own unique identity around which to build a new hospitality product.
"Although these Emirates can find inspiration in the success story of Dubai and Abu Dhabi, there is no need to duplicate," explains Landais.
"I believe that the key to unlocking the potential of these destinations is ‘differentiation'. Hoteliers new to these markets should consider their long-term commitments to the destination and ask themselves whether their hotel is totally in line with the positioning of this destination.
"The future of the Northern Emirates' tourism product lies in product diversification," agrees Tamim. "It will be vital to develop high-yield niche markets such as diving, spa travel and align the destination with growth sectors such as ecotourism, adventure and nature tourism."
In effect, the future prosperity of the region lies in its ability to offer an experience that neither Dubai nor Abu Dhabi can deliver - ultimately creating a more comprehensive tourism industry in the UAE.
The untapped potential of the Northern Emirates is both an asset and stumbling block for new developers. In many cases, the phrase "untapped potential" is synonymous with "lack of essential infrastructure", as Hilton Hotels' Abouda confirms: "On top of destination marketing, there are a number of challenges for new developments in the Northern Emirates including lack of infrastructure and airport development."
But, adds Rotana's Kaddouri, "these challenges are not so different to anywhere else in the UAE".
"Nearly all new openings in the Northern Emirates are finding it difficult to get power supplied by the local government. We're also facing natural hazards at the Fujairah Rotana Resort and Spa. We've had tsunami and red algae to cope with, so nature can also be a challenge."
In terms of local infrastructure, hotels have found themselves in a "Catch 22" situation: although they need adequate infrastructure to construct and operate their new properties, the quality of local infrastructure is unlikely to improve until they increase demand.
In the long-term, the increase in supply across the Northern Emirates should resolve the problems with local infrastructure.In the short-term, however, it may be necessary for hotels to bear some of the cost of developing their immediate infrastructure needs to ensure smooth business operations. In this sense, the brands currently making inroads into the region will pioneer the way for future developments.
Alongside the problems with infrastructure, some logistical concerns have also surfaced. Certain day-to-day business operations may become more difficult away from the well-developed and easily-accessible resources of Dubai and Abu Dhabi and hoteliers may find themselves competing heavily for local resources.
"A key challenge for new hotels in this region will be staffing because they will not have the massive draw of the larger cities," explains Rezidor's Senior.
The Northern Emirates are developing rapidly and there is a shortage of affordable accommodation — we aim to fill that gap.
"It may well be a challenge for us to employ the right kind of people in large enough numbers in these regions. We may well have to set up compounds ourselves because staff will not be able to commute from Dubai on a daily basis.
As we have discovered, the future prosperity of the Northern Emirates is particularly reliant on the development of new properties. The growth of local job markets, trade and infrastructure can only happen if the major global hotel brands continue to expand in the region.
Perhaps, the Northern Emirates therefore have more to fear from the economic climate in 2009 because new developments are particularly vulnerable to the affects of economic slowdown.
"The de-cession - not quite a depression or a recession - will certainly affect the construction of projects in the Northern Emirates," says Tamim.
"Those close to completion should be safe, but projects in their early stages are likely to suffer.
"We are expecting a slowdown in business right across the Middle East this year, particularly from the European market. People are already starting to travel less frequently and for shorter time periods. Also, some global companies have started to implement travel freezes, so it's essential that we factor this into our planning."
Despite a healthy level of caution, there are no signs that development plans in the Northern Emirates are being actively reconsidered.
The Middle East's economy remains buoyant by international comparison and can withstand the financial crunch.
Ironically, it is the UAE's positive growth figures that have become the primary concern for some of the developers.
"Global economic downturn withstanding, the Middle East still remains a fast growing economy," explains Landais.
"In 2007 we experienced 11% growth in the UAE and 13% in the first half of 2008. Double-digit growth figures and very high inflation are signs of an over-heating economy and could affect our development projects. This results in increased land costs, construction costs, difficulties for material supply, and so on. This year, we hope that these pressures will be alleviated by lower oil prices and a slowdown in the economy."
A development in the Northern Emirates is a long-term investment, perhaps more so than in other regions. After all, this is a region of untapped potential capable of securing excellent returns on capital. These new properties, regardless of the economic climate during their construction, will live through many business cycles and profit from unlocking the region's potential of being a major tourism destination.
"These developments are long-term commitments," reminds Senior, "so it doesn't matter when you make the financial commitment".
"The threat of global slowdown doesn't matter so long as you're here for the long-term."
A clearer understanding of what 2009 has in store for the hospitality industry will unravel over the coming months as performance figures become available. For now, hoteliers are standing their ground and developing strategies for the coming year - in fact, they are as bullish as ever.
"Currently, there are no hard figures to show that the UAE is in a tourism bend," says Kaddouri. "Airline and car rental are doing fine, figures from regional tourism boards largely show flattening growth in key indicators such as room rates and visitor traffic, and most hotel management companies have yet to publicly acknowledge any slowdown in business.
"It's unlikely that any of our new Rotana openings will be delayed as a result of the credit crunch. We're hoping that 2009 will be another record year in terms of new openings and our long-term strategy remains the same: to grow our portfolio and focus on new management contracts."
On the brink of greatness
This is a critical time for the Northern Emirates. If the region is to emerge successfully, then the authorities, businesses and people of the Northern Emirates will need to work together and pursue a common goal: to become an internationally acclaimed tourist destination.
"We should all remain disciplined across the region," advises Hilton Hotels' Abouda. "We should all hold our rates, provide value for money to our guests, be innovative in attracting new business, and always promote the destination not just our individual hotels.
"The better we all perform as a collective, the better it will be for the branding and recognition of the Northern Emirates as a quality destination," concludes Rainalter. "This will be positive for all of us."