Hotel and Hospitality Industry: Catering

Hotel and Hospitality Industry: Catering to the Affluent Middle East Today and in the Future

Some of the fastest growing travel and tourism destinations that have emerged in recent years are the Middle East in general and Abu Dhabi, capital of the United Arab Emirates, in particular. Despite the potential of external threats in the region, the hotel and hospitality industry has enjoyed a booming business as hoteliers, restaurateurs and others seek to capitalize on this growing industry in an increasingly affluent region of the world. While there are a number of constraints to doing business in the United Arab Emirates, all signs point to continued growth and many international chains have already heavily invested in Abu Dhabi in an attempt to gain market share while the getting is good. Clearly, time is of the essence, but it is important to identify the characteristics of the market and what can be reasonably expected from a venture capital investment in the hotel and hospitality industry in the United Arab Emirates today. To this end, this paper provides an overview of the international hotel and hospitality industry and the travel and tourism industry that accounts for the lion's share of its revenues, followed by an assessment of initiatives underway in the region that are reflective of current trends in the region. A summary of the research, salient findings and recommendations are presented in the concluding chapter.

Review and Discussion

Background and Overview.

Given its enormous economic impact, it is little wonder that the hotel and hospitality industry has attracted a growing amount of interest from both researchers and practitioners alike; nevertheless, the harsh realities of real-world management in this industry frequently elude academicians and the need for more research in this area is clear. In this regard, Montgomery, Lip*****z and Brehmer (2005) emphasize that, "In general, research enquiry about the hotel and hospitality industry and its participants is steadily accruing, although in a fairly haphazard fashion. Its development has often been reported as being hindered by a lack of understanding and communication between academics and practitioners. Gaining access to key participants within organizations is problematic, and using methodologies that are deemed useful for hotel practitioners are seen to be of key importance" (p. 343).

There are also some recent trends in the hotel and hospitality industry that suggest targeting a specific market has assumed new relevance and importance in recent years, with more and more hotels and restaurants assuming a "one-size-fits-all" approach to their service deliver. For instance, in their book, Tourism and Postcolonialism: Contested Discourses, Identities and Representations, Hall and Tucker (2004) report that the same forces that are driving globalization are having a homogenizing effect on the hotel and hospitality industry today: "Global culture may be comforting for the contrast avoider tourists but for the contrast seeker tourists it is experientially unexciting. Beachfront resorts, shopping arcades of chain stores, international airports, urban waterfront developments, hotels and restaurants are all essentially replications of each other, part of an international, corporate hotel and hospitality industry, and a standardized architecture and urban planning" (p. 176). In many cases, this is what some customers may want during a business trip or even a pleasure trip, but it is clear that standing out from the mainstream crowd in this environment has become especially difficult but more important than ever. For example, as these authors emphasize, "This is global culture masquerading as local culture. Attempts to create difference - with theme parks, waterfront redevelopments, landmark public buildings designed by celebrity architects - become but further reminders of global culture and of the futility of repetitive attempts at differentiation" (Hall & Tucker, 2004, p. 176). The "McDonaldization" of the hotel and hospitality industry, though, has not been without some advantages for international travelers, with English being widely spoken around the world and familiar fast-food eateries available as well, but an increasing number of Western and Arab travelers alike are seeking something much different, even if it costs a little more.

Travel and Tourism in the Middle East.

According to statistics announced at the 2006 at the annual World Travel Market, Middle Eastern tourism continues to be one of the most dynamic sectors with a growth of 18%, compared to the Americas (+11%) Africa (+8%) and Europe (+5%) (cited in Wells, 2006). These respective rates are shown in Figure 1 below.

Figure 1. Growth in travel and tourism destinations.

Source: Based on data in Wells, 2006 at p. 48.

In her recent study, "Middle East Destinations Lead the Field," Wells (2006) reports that the international travel and tourism industry enjoyed continuing growth, following a growth pattern that began in 2004. In fact, 2005 represented the best year ever for the industry, and the results of an analysis released by the United Nations specialist agency, the World Tourism Organisation (UNWTO), noted that the number of international tourist arrivals recorded worldwide grew by 5.5% to exceed 800 million travellers for the first time. The WTO's estimate of 808 million international tourist arrivals worldwide in 2005 represents an increase from 766 million in 2004, corresponding to an impressive annual increase of 5.5% as well as a consolidation of the spectacular growth of 10% recorded in 2004 (Wells, 2006). According to this author, in spite of the turbulent nature of some parts of the Middle East, the vast majority of international travelers are not dissuaded from visiting the UAE, Egypt, Lebanon and so forth. "In terms of consumer behavior," Wells reports, "it is evident that travellers to the Middle East have been undeterred by external threats, such as the bomb attacks in Turkey (Kusadasi, Istanbul and Ankara), Egypt (Cairo and Sharm El-Sheikh) and Jordan, possibly reckoning that they are, on balance, probably as much at risk at home as they are abroad. At the global level the impact of these isolated events has been negligible. They may have led to temporary shifts in travel flows, but they have not stopped people travelling" (2006, p. 48). Although there have been some downturns in tourism experienced at the local level, Wells suggests that in most cases, these downturns have been relatively brief in duration. As WTO secretary-general Francesco Frangialli observed recently, "The tourism sector has gained substantially in resilience over the past years. In spite of the turbulent environment we live in nowadays, destinations worldwide added some 100 million international arrivals between 2002 and 2005" (quoted in Wells, 2006 at p. 48).

The Middle East travel and tourism industry is estimated to have generated $108.5 billion of economic activity in 2004 and is forecast to grow to $193 billion by 2014 (Wells, 2006). The industry is expected to enjoy continuing healthy growth of approximately 4% a year in real terms between 2005 and 2014 (Wells, 2006). According to this author, "The support of most governments, the permanent development of tourism infrastructures and significant public and private sector investment in tourism has paid off. Additionally, the low-cost airline phenomenon and the increasing cooperation regarding border facilities among countries in the region all serve to reinforce intra-regional as well as domestic traffic" (Wells, 2006, p. 48).

Moreover, there are plans for continuing investment as well. In this regard, capital investment in the Middle East tourism industry was estimated at $19.7 billion in 2005 and is expected to reach $33.9 billion by 2015, representing a 2.7% addition to regional gross domestic product (GDP) in 2005 (Wells, 2006). An important initiative that has been launched recently in support of the travel and tourism industry was the creation of an Arab tourism bank, wholly dedicated to the sector. According to Wells, "The International Tourism Bank (ITB), based in Bahrain with a paid-up capital of $1 billion and issued capital of $2bn, due to start operating in 2006, will be the first-ever bank dedicated to the tourism sector. The Bahrain-based Investors Bank is involved in the formation of ITB" (Wells, 2006, p. 48). It is the expectation of the bank's founders that ITB will provide a new dimension to tourism in the region by helping develop individual projects or by assisting in the consolidation of the tourism sector of the Arab region by providing investments, services and technical support to tourism companies (Wells, 2006).

Based on projected growth in arrivals of 18% to a total of over 35 million, the region has become the fourth most visited in the world, surpassing for the first time the volume of tourists to Africa (estimated to have received 33 million arrivals in 2004) (Wells, 2006). According to this analyst, "Morocco, Tunisia and in particular Egypt are now considered a competitive threat to the more mature tourist destinations in the euro zone, including London, Paris, Venice and Rome" (Wells, 2006, p. 48).

All Middle East countries with data available show positive results, without exception. The biggest increase in absolute terms was recorded by Egypt, which saw visitor arrivals increase by more than 2m (+34%) to over 8m (including some 5% of same-day visitors). The country benefited, like other sun-and-sea destinations in North Africa and in "non-euro" Europe, from the strength of the eurozone currency; in addition, more than 6 million travelers visited Syria and Saudi Arabia reported an increase of 17%, congruent with the regional average (Wells, 2006).

Furthermore, Lebanon enjoyed a considerable increase (+26%) on the already positive trend experienced in 2003, despite a politically rocky patch following the assassination of former prime minister Rafiq Hariri. Minister of tourism, Joseph Sarkis, described the new Beirut government's commitment to "enhancing the promotion of tourism in different sectors and encouraging investments in the country, in order to make Lebanon a first-class tourism destination in the Middle East" (quoted in Wells, 2006 at p. 48).

Even Jordan experienced healthy growth in tourism, and managed to overcome its losses from 2003; an enthusiastic managing director of Jordan's Tourism Board declared at the World Travel Market (WTM), Mazen Homoud, reported that, "As with all the countries that have seen terrorist attacks, the resilience and the professionalism of the (tourism) industry is already shining through and Jordan is back on track" (quoted in Wells, 2006 at p. 48). The proof is in the tourism pudding, so to speak, and the managing director was right with inbound arrivals to Jordan increasing by a whopping 21% to 2.8 million in 2004 and by 9% for the period January-June 2005; it should be noted, though, that not all these visitors were regular tourists. According to Wells, "Jordan's capital Amman has become the centre for many companies and agencies working to re-build Iraq; this business visitor sector has become the country's second-highest earner of foreign exchange --contributing $803m, 10% of Jordan's GDP in 2004" (2006, p. 49).

Egypt's tourist sector continued to experience healthy figures, generating $6 billion in 2004. The country's tourism minister, Ahmed el Maghraby, announced plans to add another 10,000 hotel rooms to the current inventory over the next decade in an attempt to accommodate the continually increasing demand: "Egypt has marvellous potential and can attract 14m tourists a year," the minister said. A huge swathe of dedicated new tourism development is focused on the Red Sea riviera between Hurghada and Safaga. The new umbrella organisation of the Cultural Heritage and Tourism Organisation of Iran, headed by the country's deputy president, Parvaneh Sattari, exhibited for the first time at the WTM in London in November heralding Iran's determination to make an impact on the international tourism stage" (quoted in Wells, 2006 at p. 49).

Tourism in Oman has also experienced healthy growth patterns, due in large part to the political stability provided by the leadership of Sultan Qaboos, who celebrated the 35th anniversary of his accession to the throne in 2006 (Wells, 2006). The high quality hospitality provided by the industry in Oman was recognized by the Conde Nast Traveller readers' award presented to the Chedi hotel in Muscat. According to Wells, "The Chedi was listed in the magazine's top 10 best resorts and top 10 best spa resorts in the Middle East, Africa and Indian Ocean at the eighth annual awards ceremony held in London in September 2005. Hot on its heels, the beachside Shangri-La hotel resort development, just outside the city of Muscat, is also wooing the luxury market with a seven-star hotel" (Wells, 2006, p. 49).

Travel and Tourism in the United Arab Emirates.

According to U.S. government analysts, the United Arab Emirates' (UAE) per capita GDP is comparable to those of leading West European nations and expenditures of oil revenues and its moderate foreign policy policies have allowed the UAE to play an increasingly important role in the affairs of the region (UAE, 2007). As Sheller and Urry (2004) note, "The country's oil resources took Dubai into a tremendous spiral of development: paved roads, telephone, water supply, and electricity.... This has provided the incentive to diversify its economy in order to become less dependent on oil. Thus the strategy has been systematically to reinvest the revenues from oil into society. In addition, "The UAE has an open economy with a high per capita income and a sizable annual trade surplus" (UAE, 2007, p. 3). According to Salloum (2001), the United Arab Emirates has transformed itself from a backwards rural kingdom into a modern, cosmopolitan state with much to offer the business and pleasure traveler alike. "A collection of mud huts a few decades ago," he writes, "Abu Dhabi today, virtually a new city, was a promising beginning for our exploration of the United Arab Emirates. The broad tree-lined avenues, edged by whitewashed buildings, gave no indication that for untold centuries this had been a desert land. The past had been hidden by the affluence of the modem world" (Salloum, 2001, p. 364). The author describes Abu Dhabi as, "An ultra-modern city of skyscrapers, towering to the heavens, landscaped gardens and streets lined with trees and flowers. For us, it was easy to imagine that Abu Dhabi's magic was to be found in the whole of the UAE, consisting of seven states: Abu Dhabi, Dubai, Sharjah, Ajman, Umm Al Quwain, Ras Al Khamiah and Fujairah -- all with capitals carrying the same name as the state" (see map at Appendix a) (Sallou, 2001, p. 364).

The recently established Abu Dhabi Tourism Authority (ADTA) is actively targeting the UK as a key priority market in its drive to boost visitor numbers from less that lm in 2004 over 3m by 2015. Britain already ranks as the largest source of European travellers to the emirate, accounting for some 65,000 visitors and 215,000 guest nights in 2004, an increase of around 20% on the previous year (Wells, 2006). According to Sheller and Urry (2004), "Today Dubai is truly a place of flows. Dubai airport is one of the world's fastest growing. In 2003 about 18 million passengers passed through it, which was an increase of 13 per cent from the year before (itself an increase of 18 per cent on the year before that). The prognosis is that by 2010 the number of passengers will have increased to 40 million" (p. 183). In this regard, Sheikh Sultan Bin Tahnoon Al Nahyan, chairman of the Abu Dhabi Tourism Authority, enthused: "Abu Dhabi has significant potential as a tourist destination. It has great natural assets, including year-round sunshine, extensive beaches, islands and spectacular desert scenery. We also have top quality luxury hotels, superb sports and recreation facilities, as well as a range of cultural and heritage attractions. We believe the European market is now very receptive to the Abu Dhabi message" (quoted in Wells, 2006 at p. 48). Moreover, Abu Dhabi intends to invest more than $10 billion during the next decades in tourism-related projects and is planning to increase the number of hotel rooms available from 7,500 to 20,000 (Wells, 2006).

Abu Dhabi won the "best stand" award at the WTM with an impressive display that attempted to transport visitors to the Middle East -- through the creation of an atmosphere combining sights, sounds, and smells such as the aroma of spices, incense and rose petals. With its ambition to have 1.4m tourists by 2010 and to demonstrate its commitment to the sector, on 25 September 2005, Qatar held its World Tourism Day. It is also on track with plans to host to the Asian Games in December 2006. Qatar plans to increase the number of hotel rooms from the current 3,700 to 7,400 by 2007. Meanwhile, Doha airport is being extended to accommodate as many passengers as Charles de Gaulle Airport in Paris by 2015 (Wells, 2006).

It is clear that the policymakers in the UAE are not content to rely on the natural beauty of the region or the stellar accommodations to draw tourists. For instance, Wells reports that initiatives range from indoor skiing to underwater hotels, with Dubai providing maximum diversity for travelers (2006). These initiatives include the following:

2007 -- the Hydropolis: The world's first underwater hotel which guests will reach by train through a clear tunnel on the seabed, to stay in $6,000-a-night underwater glass rooms 5km offshore.

2007 -- Dubai Sports City: The world's only integrated purpose-built sports venue, will incorporate a Manchester United soccer school, a David Lloyd tennis centre and an Ernie Els golf course.

2008 -- the World: A collection of 300 manmade islands currently under construction 5km off the coast, being built in the shape of the world, will offer a collection of luxury villas and apartments.

2008 -- the Burj Dubai: At half-a-mile high, the world's tallest tower will have hotels, apartments and shops. The $275 million building will be extendible should anybody else have the temerity to top its height.

2010 -- Dubailand: This 5.2 billion [pounds sterling] collection of theme parks, shops and entertainment centers will be twice the size of Walt Disney World in Florida. Its centerpiece will be one of the world's largest shopping malls, Mall of Arabia, and a dinosaur theme park, Restless Planet.

Luxury tourism in the Middle East is also on the up epitomised by groups such as Jumeirah, the young, fast moving Dubai-based luxury hospitality group. They are expanding rapidly within the GCC region and have already been appointed to manage the luxury hotel at Dubai Towers in Doha, a five-star property that will feature 146 luxurious rooms and suites. Jumeirah will also manage luxury hotels and a theme park within the Saraya Aqaba development, which is expected to transform the beachfront town of Aqaba in Jordan into a world-class waterfront resort city.

In Dubai, Jumeirah was recently selected to operate 'Aqua Dunya', a unique theme park resort located adjacent to the above-described Dubailand, a project that will become the world's largest leisure, entertainment and tourism attraction. The 8-million square foot theme park includes the Jumeirah Desert Pearl Hotel, a wet and dry theme park, a port and traditional market district. For a record fifth consecutive time, readers of Business Traveller UK voted Jumeirah Beach Hotel as the 'Best Resort Hotel in the World' whilst its sister property, Jumeirah Emirates Towers, was named 'Best Business Hotel in the Middle East' for the third consecutive year. The company uniquely held all three places in the Best Business Hotel category, with Burj Al Arab and Jumeirah Beach Hotel coming in second and third places, respectively (Wells, 2006).

Beyond these major tourist draws, the UAE has other tourist destinations readily available, and because of the state's relatively small geographic size, all of these destinations are within a day's drive or less from the capital. These popular attractions include the following:

Driving the road at the foot of the Hajar Mountains is a small coastal plain which is one of the few places in the UAE where vegetation grows without irrigation. "Water seeping from the overshadowing, barren yet picturesque Hajar Mountains have made lush farms and coastal villages possible. The greenery of the surrounding lowlands, a rarity in this part of the world, has been instrumental in Ras Al Khaimah being labelled 'flower of the Gulf" (Salloum, 2001, p. 364).

The large oasis of Dhayd, surrounded by orchards.

The Hajar Mountains that separate the east coast of the UAE. from the rest of the state feature.".. high jagged peaks, in various colors and shapes, that overlook deep wadis, dotted with tiny villages and, here and there, patches of green fed by natural water springs. The excellent two-lane highway crossed a wild lunar-like landscape, in places, breath-taking in its beauty. We stopped a few times to photograph some of these views, especially the valley oases overshadowed by the colourful mountains, streaked with amber, brown, copper and deep purple" (Salloum, 2001, p. 364).

The ancient Badiyah Mosque, the oldest mosque in the UAE.

Khor Fakkan, a Sharjah enclave where the charm of the Gulf of Oman coast reaches its epitome. Exquisitely landscaped, the town with its elegant villas and wide boulevards, edged by row upon row of carefully tended flowering shrubs and palm trees, has an overpowering Mediterranean air.

Belying its desert surroundings, the city of Fujairah sports white-washed homes draped with flowers and trees and fine beaches that made it an appealing resort long before the discovery of oil. Salloum reports visiting an attractive waterfront with roundabouts with fountains and Arab themes, "like a huge replica of a coffee pot and cups atop greenery and flowers. Toward the nearby mountains, there was a skyline of sparking white structures, dominated by the impressive Fujairah Trade Centre which is luring foreign firms on an ongoing basis" (2001, p. 365).

The jungle-like environment of the Sharjah inlet of Khor-Kalba with dense mangrove trees, replete with singing birds (Salloum, 2001).

Besides these powerful tourist draws, there are other potential sources of travelers to the region as well. For example, each years, tens of millions of religious pilgrims make the trip to visit holy sites such as Jerusalem and Mecca. As Wells points out, "Pilgrimage is big business. Syria and Saudi Arabia are currently leading the way in their expanding religious tourism sectors. Iran is also aiming to dedicate tourism investment to this sector assessing that Hajj pilgrims might consider visiting some of the Islamic Republic's important religious locations on their way to Mecca" (p. 49). The results of the study by the WTO found that the Middle East hosts many thousands of visitors; moreover, the countries in the region have the resources available to invest in infrastructural developments that will directly benefit the hotel and hospitality industry in the future. For example, Saudi Arabia is one of the largest outbound markets with tourists from the Kingdom spending around $6.7 billion each year on overseas travel, a figure that equals approximately 5% of the country's GDP; likewise, travelers from the UAE spend more than $4.9 million, representing an average of $1,700 per trip, which is $500 higher than the European average (Wells, 2006).

The expectation of affluent Arab travellers visiting their countries has fueled increasing interest in travel and tourism promotions within the Gulf Co-operation Council (GCC), which invests more than $12 billion each year on international vacation spending. According to Wells, "No fewer than six new national tourism boards from Europe, Asia and Africa have launched direct Middle East operations in Dubai in 2006, following in the footsteps of the long-established Visit Britain, sponsored by the national tourist board of the UK, and the Indian Government Tourist Office (IGTO). Germany, Turkey, Cyprus, Singapore, Malaysia and Morocco have all set up shop in Dubai and others may follow soon as record-breaking outbound travel activity continues" (2006, p. 49). In addition, there is a great deal of interest in promoting intra-regional tourism. For this purpose, Dubai has been a longstanding popular destination for Arabs from the Gulf region and Oman is becoming increasingly attractive to GCC nationals as a holiday destination, particularly the verdant southern province of Salalah, which provides an oasis during the inhospitable summer months (Wells, 2006).