By Rory Jones
Once popular as an adult playground of glitz, glamour and vice,
Dubai is shrugging off its reputation as the Las Vegas of the
Middle East and appealing to a more reserved niche of tourists:
families.
The cosmopolitan Middle Eastern city-state has identified theme
parks as a way to increase the number of tourists visiting its
shores and attract families from the Persian Gulf, Africa and
Asia.
Sheikh Mohammed bin Rashid al Maktoum, Dubai's ruler, has set
aside 25 million square feet of land for theme parks that will cost
roughly 10 billion U.A.E. dirhams ($2.7 billion) to construct and
eventually match California's Disneyland Resort and Singapore's
Sentosa Island in size and scale.
The ruler's real-estate development company, Meraas Holding,
already has started work on three parks and one hotel, which all
are billed to open in 2016. It has so far attracted big names to
license brands, such as Six Flags Entertainment Corp. and Merlin
Entertainments PLC's Legoland, which plans to create 15,000 Lego
models from 60 million bricks.
One local investment group, Ilyas & Mustafa Galadari Group,
or IMG, also has licensed Time Warner Inc.'s Cartoon Network and
Walt Disney Co.'s Marvel Studios to create a 1.5
million-square-foot multithemed park, which it claims will be the
world's largest indoor entertainment center.
"These are ambitious aims," Sheikh Mohammed said last year as he
announced Dubai's tourism "vision" to increase revenues from
tourism over the next eight years. "But they are achievable."
But Dubai's real-estate ambitions--which also are showing up in
new investments in condominiums and hotels--have rekindled concerns
among some analysts and investors that Dubai's government is
fueling another property boom. Residential prices crashed more than
50% in 2009, leaving investors with painful paper losses, after six
years of stellar property growth.
The planned projects already are hitting delays. Meraas
announced in 2012 that its first park would be open in 2014. IMG
World of Adventures also was slated to open this year and now has
no scheduled opening date, according to a spokesperson.
At the same time, Dubai has had a mixed record with developing
family-style theme parks with enormous price tags. In 2008, a
venture of Kerzner International Holdings Ltd. and Istithmar
successfully opened Atlantis, The Palm, a resort complex that
includes a 42-acre water park.
But in the years running up to the bust, the government planned
a development of theme parks and residential villas spread over 100
square miles called DubaiLand. This was put on hold as the global
financial crisis caused developers' funding to dry up.
"Dubai was a top market in 2008 and little came from those
developments, " said Robert Niles, the editor of
ThemeParkInsider.com, a website dedicated to the sector.
With little oil revenue compared with other Persian Gulf
countries, Dubai has long looked at tourism as a way of generating
economic activity. The emirate has been evolving into a destination
especially since the Arab Spring uprisings increased its appeal
among vacationers from Saudi Arabia, Qatar and Bahrain compared
with markets such as Cairo, Beirut and Istanbul.
An Islamic state, Dubai doesn't allow any form of gambling or
consumption of alcohol in the street but is known to be more
liberal than most of its Arab neighbors. It still attracts tourists
looking for a luxury experience in the emirate's many hotel bars,
night spots, giant shopping malls and beaches.
The emirate believes it can compete with major global theme-park
destinations, such as those in Orlando, Singapore and Japan,
particularly by being a haven for Muslim tourists. The push is
picking up steam now because Dubai has a goal of increasing its
annual visitors from roughly 12 million this year to 20 million by
2020 when it hosts World Expo, a quadrennial world's fair for which
Paris's Eiffel Tower was built in 1889.
Privately held IMG said earlier this year it closed 1.2 billion
dirhams in financing with Abu Dhabi Islamic Bank to fund
development of its park.
Meraas, which is owned by the ruler and doesn't publish
financial statements, is considering an initial public offering for
its theme-parks division to fund development, according to a person
familiar with the matter.
But it isn't entirely clear developers and the emirate plan to
finance all the planned parks.
Furthermore, Dubai's ability to attract enough crowds for
world-class theme parks remains to be tested. Walt Disney World's
Magic Kingdom in Orlando, the world's most popular theme park, got
more than 18 million visitors in 2013, according to a report by the
Themed Entertainment Association and AECOM. That is more than eight
times Dubai's entire population.
Still, the planned theme parks are spurring development of
hotels in the midrange market. Privately owned SKAI Holdings in
August launched sales for a 60-story, four-star
serviced-condominium hotel. Since then, it has secured 927 million
dirhams from investors to build the 1.2 billion dirham tower.
"I've got no doubt Dubai will continue to grow as a tourist
destination, " said Edith Hruba, an Italian investor who bought 15
hotel rooms and apartments in the SKAI project.
The number of hotel keys in Dubai will increase from 80,000 to
120,000 within five years, predominantly in the midrange segment,
according to Colliers International. Meanwhile, internationally
recognized hotel brands are also signing deals to manage the
locally funded and developed hotels.
Hilton Worldwide Inc. recently opened a DoubleTree Hotel in the
city, while Starwood Hotels & Resorts Worldwide Inc. plans to
expand Aloft hotels in the U.A.E. with local developers.
Hyatt Hotels Corp. also recently launched its midscale Hyatt
Place brand in Dubai with a local developer and will open another
hotel next year, according to Ron Cusiter, the vice president of
sales operations for Southwest Asia.
"If Dubai is going to be successful with these theme parks,
there has to be more affordable accommodation," Mr. Cusiter
added.
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