What should Qatar learn from Dubai’s cautionary tale

Doha skyline

Almost like a volcano, Dubai ”erupted” less than two decades ago, into a huge Disney Land, one in which adults play, work and dream. The locals who now account for less than 20% of the population, are now a minority in their own country sometimes completely isolated and disconnted from the community of foreigner whose sole attraction in Dubai are the tax free generous salaries. Thinking that oil can buy anything, Dubai thought it could buy a new identity, one which is grand and unseen anywhere in the world. It seems the financial crisis has given a disturbing wake up call to Dubai as well as to Abu Dhabi, its wealthier brother who was called to bail out Dubai in huge projects such as Burj Tower, the lallest in the world, which was named Burj Khalifah, after the ruler of Abu Dhabi.

What seemed to be ambitions with a vision, turned out to be unrealist dream, the emirate now struggling to pursue only the profitable businesses and projects, which are fewer and fewer. Empty luxury hotels which have pushed the capacity of hotel rooms to a level twice the current demand along with empty office buildings offer a rather gloomy picture. Needless to say, projects such as artificial islands which are now said to be sinking. Another grand project, The Palm is also another example of how grandeur could turn it into a very sad neighbourhood, with half of the ultra luxury residences empty, not to mention hotels which keep opening up on The Palm, despite the ebbing demand.

Once hailed as visionary long term projects which will attract professionals from all over the world, Dubai Media City and Dubai Internet City are now working at half their initial projected capacity. Major golf, tennis and cricket sports events have also been losing spectators, with less and less tourists visiting the emirate for these games. There is also the famous Dubai Shopping Festival which has attracted middle class expatriates working in Dubai and locals, rather than foreigners coming to make their shopping in Dubai, for several reasons: prices, especially of luxury goods are higher than in Europe, customer service is at lower levels than in Europe and in many cases the selection of products in stores is lesser than in the Western flagship stores.

All of these lavish events and promotions were initially created to attract tourist to the emirate, to fill the hundreds of five star hotels and resorts, yet will the time passing by and more and more tourists having already visited once, most are not returning due to several factors: the very hot and humid weather during Summer and Autumn and more and more sand storms in winter; the lack of infrastructure (all roads lead to the malls), with very few other genuine attractions. As if the first Ritz Carlton was not enough, a second 400 room Ritz Carlton was opened earlier this year; the same applies for Jumeirah Hotels which opened in February its eight property in Dubai, on The Palm, the 400 room Zabeel Saray. Dubai’s ambition to have the first Armani Hotel in the world will cost the Emirate much more than initially estimated, especially on a long term. The Armani / Emaar joint venture to develop Armani Hotels is likely to be at least 10 times more profitable for the upcoming property in Milan than the one in Dubai.

As for Dubai’s positioning as a luxury shopping destination, this has also been fading in the past two years, proving that the two major malls, Emirates Mall and Dubai Mall exceed demand, disregarding malls such as Burjuman which have become derelict. The shopping experience which was initially boosted by the spectacular elements such as the huge acquarium at Dubai Mall and the sky slope at Emirates Mall has turned into a basic shopping experience which can be easily found on any typical mall worldwide, thefore losing appeal.

Was it the pace of development to blame or the sheer size of the ambitions and dreams ? Both ! It was unrealistic to think that New York or Singapore could be replicated just by building skyscraper one after the other one and creating an artificial financial hub which was almost crushed at the debut of the crisis, the debt accummulated by Dubai reaching astronomic proportions.

When thinking of the Middle East many have associated Dubai’s spectacular development with Qatar’s, both evolving at the same time, however at a different pace. The ”Dubai” temptation is visibile in Qatar’s capital Doha too, but at a much smaller scale. While it is rare to find empty office buildings like in Dubai, Qatar has a similar problem regarding luxury residentials, with over 40% of the existing capacity being unsold. Qatar also followed in the footsteps of Dubai in organizing the biggest golf and tennis tournaments, but merely for the promotion of the country and for the creation of its reputation abroad, rather than for attracting tourist. Qatar’s ruling family seems to have better understood that it takes much more than huge luxury hotels and resort and major sports competition to develop a world class tourism destination. While still organizing film festivals, exhibitions, concerts, at a smaller scale, Qatar has been investing in its Foundation, a cultural and educational institution  which has been attracting students from all over the world to its state of the art learning facilities and most reputed international universities which have created joint ventures with the Qatar Foundation. The Foundation arm has also been responsible for allocating important amounts for research in various sectors, creating impressive facilities at world standards.

For now, Qatar is not a luxury shopping destination and nor is it a tourism destination either. Although things might change very fast, the government being motivated by the 2022 Fifa World Cup which the country will host. Morgans, Shangri La, Four Seasons (second) and Mandarin Oriental luxury hotels are set to open by 2014 and many other hotels are planned. A spectacular in land development is being planned to recreate the city centre, building not only luxury hotels and restaurants but also mid range once. This might indicate a more sensible approach targetting expatriates from various levels. Qatar, particularly Doha has its own ”Palm”, called ”The Pearl” with similar issues like the one in Dubai – lack of long term vision and lack of strategic planning. That is why, ”The Pearl” is today, an unfortunate example of how grandeur and large scale projects can fail, creating also a false impression about the potential of Doha’s luxury market.

Also, the recent investment Qatar has made abroad, especially in luxury retail and hospitality seem to add value and be profitable in the long run (Peninsula Hotel Paris, a stake in German luxury car maker Porsche and iconic luxury department store Harrods in London). However, due to the turmoil in North Africa, many of Qatari Diar’s investment in Morocco and Egypt are unlikely to be completed and remain uncertain for the future.

Oliver Petcu