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Fri 25 Jul 2014 07:08 PM

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How Dubai is helping Ireland's economic push

Tourism is now Ireland’s second-largest industry, and is playing a vital role in bringing the Emerald Isle’s economy back to full health. Much of that has been driven by close ties between the country’s horse-racing industry and Dubai’s ruling family.

How Dubai is helping Ireland's economic push

Nearly 30 years ago, the ruler of Dubai, HH Sheikh Mohammed Bin Rashid Al Maktoum toured a lush stretch of land outside Dublin and envisaged what soon became one of the most valuable thoroughbred stud farms in the world.

“Sheikh Mohammed came to Ireland and saw the big oak trees, the big beech trees at Kildangan, and there were big beef cattle on the land, and he thought ‘if this land can produce cattle that size and trees that size it can produce horses’; that’s how the story goes,” the general manager of Irish Thoroughbred Marketing Elaine Hatton says from the stables of Ireland’s most famous racetrack, the Curragh.

“He’s seen as being wise before his time and he’s seen the benefit of producing horses on Irish land and using Irish people. [He had] unbelievable foresight.”

Sheikh Mohammed has since tripled the size of Kildangan Stud Farm to 1,600 acres, with several stables, a state-of-the-art breeding facility, a practice racetrack and an abundance of the famous Irish greenery.

Under the brand Darley, which is used for all of Sheikh Mohammed’s breeding businesses around the world, the farm now trains and breeds dozens of thoroughbreds annually, including some of the most successful winners of the past 20 years.

Kildangan presently has ten stallions that produce at least 100 foals each year, with the most expensive stallion worth $50,000 per foaling session. Owners come from all over the world to have mares served by Sheikh Mohammed’s stallions.

Thoroughbred racing is one of Ireland’s largest industries, generating €1.1bn ($1.48bn) for the country’s economy last year. The figure is believed to be far greater when private horse sales are taken into account and the sector is presently doing an economic study to properly evaluate its contribution.

Sheikh Hamdan Bin Rashid Al Maktoum, deputy ruler of Dubai, also plays a key role. He has built up the Derrinstown Stud he bought in 1982 from 375 acres to 2,000 acres and it now has five thoroughbred stallions.

Hatton says the sheikhs’ stud farms jointly employ more than 700 people across the country, including in rural areas where there are few other economic opportunities. The jobs include trainers, vets and jockeys, as well as people hired to clean the stables, maintain the stud’s environment or wash the rugs. But the indirect impact is even greater.

“The local shops get business from having more [horse] owners come [to Kildangan], the local farmers supply hay, straw and horse feed and we use local farmers as contract workers if work needs to be done on the farm [such as] fencing,” says the director of Kildangan Stud Farm, Joe Osborne, whose late father Michael introduced Sheikh Mohammed to the region.

“It’s a whole lesson in trickle-down economics; one horse in terms of what that means to the entire economy.”

Dubai Duty Free and Abu Dhabi-based airline Etihad have also added value to Irish horse racing with their respective sponsorships of the Irish Derby and the Irish 1,000 Guineas.

The benefits also have spread to Dubai, where more than one third of the horses that won races during the emirate’s carnival season last year were Irish.

“Most of the top horses [Sheikh Mohammed] has in Dubai have been born and bred here [at Kildangan],” Osborne says. “He’s a very good case study of how global [the Irish thoroughbred industry] is.”

Horse racing also is an intricate part of Irish tourism, the country’s second-largest industry behind agriculture (which encompasses horse racing).

Last year, the tourism industry across Ireland raked in €3.9bn from 7.9 million tourists, accounting for nearly 4 percent of gross national product (GNP) for the Republic of Ireland and 4.9 percent of gross domestic product (GDP) in Northern Ireland. Across the island it employs 200,000 people.

Many of the visitors were thoroughbred owners either attending a major horse race or inspecting potential breeding and purchasing opportunities.

“The really good news was that that was quite a significant increase on 2012,” Tourism Ireland director of markets Simon Gregory says.

“Visitor numbers grew by about 7 percent and revenue was up by 12 percent. We’re coming out of a few difficult years where the global economy and travel have been down, so last year was a really big turnaround for the island. And to see revenue numbers ahead of visitor numbers is really positive.”

About 42,000 Gulf residents travelled to the Emerald Isle last year. The exact figures are difficult to determine but Tourism Ireland estimates this was a 2-3 percent annual increase.

And the figure is expected to only continue to rise, with both of the UAE’s major airlines Emirates and Etihad increasing to double daily flights to Dublin this summer. Etihad, which was the first UAE airline to fly to Dublin, in 2007, increased its flights from ten per week in July. Emirates, which started services to Dublin in 2012, will put on the extra seats from September.

Dublin is regularly one of Etihad’s ten busiest destinations and last year the airline flew a record 240,000 passengers on the route.

“The increase in air access [from the Gulf] over the last couple of years has been huge and obviously that drives tourism,” Gregory says.

“The links have definitely improved and we expect that to increase again, but it’s also important in terms of the feeder traffic from Australia and, increasingly, from India and China, as Emirates’ and Etihad’s networks have increased in those markets it also gives us huge opportunities there.

“[Etihad’s direct flight] was the first time we had one-stop flights from Australia; previously they had to come in through Singapore and London. So that makes us more attractive and also because Emirates and Etihad both fly out of the UK as well, people can come into Ireland and out of the UK or into the UK and out of Ireland. It just makes it very flexible.”

A recent decision to allow travellers with a UK visa to also enter Ireland and vice versa also is expected to help boost tourism among citizens of countries that require a visa, including all GCC nationals.

The visa waiver will be trialled with Chinese and Indian visitors later this year and is then expected to be rolled out globally.

Gregory says Irish tourism effectively has two markets within the GCC — nationals and expats.

“For [nationals] it’s very much the change of scenery, the cooler climate, the greenery, the fresh air — that’s very much the driver,” he says. “We’re very conscious of the fact a lot of GCC nationals will spend time in Britain, so part of our message is, if you’re there for the summer because you want to get away for a couple of months then Ireland is an obvious place to do a side trip.”

Golf also is a major draw card among GCC nationals. The isle is known to have some of the best courses in the world — even attracting US billionaire and golfing enthusiast Donald Trump, who in February bought the Doonbeg course in County Clare for €15m.

Gregory says for expats, Ireland is all about castles, churches, pubs, stories, literature, music and friendly people.

“The expat community would have a much greater awareness and knowledge of Ireland,” he says.

Irish music and literature in particular have spread across the world. Shows such as Riverdance and Lord of the Dance have been performed in front of millions around the world, while Irish writers such as WB Yeats, Oscar Wilde and James Joyce are read and studied all over the English-speaking world.

“It always shocks me when I travel around the world and people are quoting Yeats. There’s a huge knowledge and affection for it; it’s incredible how far and how well it travels,” Gregory says.

Ireland even houses the largest collection of Islamic texts outside the Middle East, at the Chester Beatty Library.

The 6,000 impressive Qurans, manuscripts and rare books, including one of only six volumes of the Prophet Mohammed’s life, were accumulated by Chester Beatty — a wealthy American mining engineer who migrated to the UK in the early 19th century but was exiled to Ireland in 1950, aged 75. Beatty had spent each winter between the first and second world wars in Egypt, where he developed a fascination for illuminated Qurans and began buying some of the most precious versions.

The total collection is now considered one of the finest in the world.

“You couldn’t put it together now, it wouldn’t be conceivable, it wouldn’t be possible,” Chester Beatty Library director Fionnuala Croke says.

Perhaps it’s because there are 70 million people around the world with Irish ancestry that makes the island — with an area of 70,000 sq km it ranks about 120th in the world according to size — so well known.

Emigration from Ireland spiralled following the global financial crisis. In 2012 and 2013 alone, up to 34,000 people left the country, the majority of them Irish nationals.

Approximately 6,000 Irish nationals live in the GCC and a large handful of them are in senior business positions, including Colm McLoughlin, the founding CEO of Dubai Duty Free, and Gerald Lawless, the president and group CEO of Jumeirah Group of hotels.

Those expats also helped boost Irish tourism last year with the country’s most successful marketing project ever, The Gathering. The event lured back thousands of Irish immigrants and their ancestors for reunions and social events held throughout the year, significantly contributing to the revenue growth.

“Ireland does punch way above its weight because it has that strong reputation [abroad]; the diaspora really does help because people [understand] Ireland because they all know someone that’s Irish,” Gregory says.

“[The diaspora] is a really powerful influence and network and The Gathering really re-activated that last year because people got involved. There were people in the GCC organising family gatherings and bringing people home; there were people using their business networks and bringing conferences to Ireland. It kind of put Ireland back on the agenda as a place that was alive and full, and that was really important after the economically difficult period; it sent out a message that Ireland was open for business.”

Lawless is among some of the most successful Irish expats who have participated in the government-led Global Irish Economic Forum, which aims to tap into the country’s network of international expertise to help it recover from the global financial crisis.

Ireland was one of the first countries to fall into recession during the credit crunch. Its decline was made more shocking by the fact that leading up to that point it had been a leading light of the European economy and one of the most successful in the world.

The Celtic Tiger, as it was known because of its rampant economy, grew by nearly 100 percent in the decade to 2007. But over-lending by banks saw it plummet into recession the same month as investment banking giant Lehman Brothers declared bankruptcy, September 2008.

The economy has returned to positive territory this year, with GDP up 2.7 percent in the first quarter, according to the country’s Central Statistics Office.

Ireland’s debt-to-GDP ratio was at 116 percent and its deficit at 6.7 percent of GDP in 2013, while the government expects the economy to expand by 2.1 percent this year.

As in most areas of the world, Irish tourism plummeted during the financial crisis. Visitor numbers fell by a few million, including 1 million from its largest source market, Great Britain, alone.

“It was tough. The industry had a very, very difficult couple of years,” Gregory says. “We’d had a huge increase in capacity in the hotel sector in the preceding years … [and] banks were looking at people with high levels of debt and calling in some of those loans; it was a difficult two or three years.”

But smart economic changes by the government have helped to kick-start things again. The airport departure tax was abolished and value-added tax (VAT) was cut from 23 percent to 9 percent for tourism and hospitality related items.

“[The tax changes] have been a real positive influence in terms of competitive pricing and making businesses sustainable,” Gregory says.

“It has been very significant that we’ve seen the turnaround [in tourism] and it is contributing to revenue for the industry on the ground, it’s contributing to tax take and it’s very much seen as one of the catalysts of the economic recovery.”

But the recession also drove Tourism Ireland to become one of the most effective tourism marketing organisations in recent years. On top of The Gathering, it initiated a global ‘go green’ project that has seen some of the world’s most iconic landmarks light up in the country’s national colour on St Patrick’s Day, 17 March.

The Burj Al Arab on Dubai’s coastline was one of the first buildings to participate, along with the Sydney Opera House and the Pyramids in Giza, Egypt.

“That really gives us a platform to leverage the PR [public relations] opportunities around that,” Gregory says of the €8m worth of advertising the idea has generated. “We get a huge amount of media coverage around the world. Now people come to be part of it.

“It’s the most effective piece of marketing we do; we don’t pay venues to do it, we contribute small amounts if there’s operational costs but it really is something that people want to be a part of.”

Tourism Ireland also has been actively working to boost Northern Ireland’s intake of visitors, including spending £97m on tourism sites dedicated to the ill-fated RMS Titanic, which was built in Belfast and sank in the Atlantic in 1912.

Thoroughbred horse racing was one of the only stable industries in Ireland during the credit crunch. Although it also suffered a slump, its strong international network — including its connection with Dubai — helped keep it afloat. It also was an influential element for the tourism recovery.

“There’s natural links [between Irish horse racing and tourism and] a lot of business links,” Gregory says. “People will go to the stud and they’ll go out to the Curragh [race track] and tour around… so there’s definitely a natural affinity between the two markets because of that.

“There is a lot of traffic on the back of the horse racing so it’s certainly appealing, and certainly to a GCC national audience there’s an awareness that Ireland is strong in that.”

One can only wonder how strong that affinity, and the Irish thoroughbred industry, would be had Sheikh Mohammed and Sheikh Hamdan not foreseen the potential of the Emerald Isle.

From Shannon to Dubai: The growth of duty-free shopping

Dubai Duty Free may be the largest airport retailer in the world, but the concept of removing tax from products bought by plane passengers started well before aviation was big in the Gulf.

In fact it started at Shannon Airport in Ireland, when in 1947 Brendan O’Reegan was catering controller of the airport hotel and dared to question why his customers were paying duty on bottles of alcohol they were about to export out of the country.

The question soon bloomed into a new world of shopping.

“When a [connecting] flight came in they’d be on the ground for quite a few hours and all the passengers got a meal but when they were finished there was nothing to do,” Bill Maloney, the manager of the first duty free store, explains to Arabian Business.

“Once the idea caught on you had a lot of Irish-Americans coming over to see people every year, then they’d be going back and they would be allowed to buy [duty free products]. Then bit by bit people were [passing through Shannon Airport on the way] to Europe, as well.”

Maloney was a young 26-year-old when he began managing the first duty free store.

Liquor was the first tax-free product; the price of a 5 pound bottle was slashed to 10 shillings, he recalls.

But it did take a long time to convince customs it was a genuine business concept.

“Duty free was a new thing, there was no other airport in the world doing it and customs were afraid,” Maloney says.

“They were a bit superstitious… We had to prove that we were on their side and that no way would we be doing anything like taking a nice bottle and giving it to a friend; we accounted for everything.

“We had to take stock at the end of every eight-hour shift, taking stock three times a day just because the customs would say ‘oh there’s going to be a lot of people stealing’; we had to show we’d sold everything.”

Eventually business boomed and word spread to Amsterdam and London, whose airports were the next to follow.

Dubai Duty Free started in 1983 and last year turned over a record $1.8bn in sales, an 11 percent increase.

It is fitting then that the business, now the global leader, has been run since its inception by an Irishman, Colm McLoughlin.

“There’s a kind of emotional link between the duty free industry and Ireland,” McLoughlin says.

Worldwide, the duty free industry is now worth about $40bn, of which more than half is through sales at airports.

The Guinness effect

If there is one thing most visitors to Ireland do, it is visit the Guinness Storehouse. The 250-year-old ale is perhaps the most well-known Irish export, with 1 billion pints consumed each year.

So popular is the brand the firm had to relocate in 2000 to a larger premises, which now sees 1.2 million tourists, or 55 percent of Ireland’s total, visit annually.

According to Guinness Storehouse managing director Paul Carty, the ale’s creator, Arthur Guinness, made two important business decisions early in the company’s history.

The first was to sign a 900-year lease for the brewery at just 45 pounds per year, a nominal fee these days, although the company bought out the remainder of the lease in the 1960s.

Then in 1784 he managed to convince the Dublin authorities to grant him water rights for 8,975 years, ensuring a vital ingredient.

These days Guinness is sold in 150 countries and is so popular internationally, breweries have been established all over the world, including in Nigeria — now the largest — the UK, Nepal and Canada.

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