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MIddle East Recession

Dubai and Abu Dhabi forecast riding recession out faster than the rest of the world

Hazel Heyer, eTN Staff Writer  Jan 21, 2009

In the wake of predictions of stagnant growth in global tourism by the World Tourism Organization (UNWTO), Jonathan Worsley, the co-organizer of the Arabian Hotel Investment Conference (AHIC) calls for the region’s hospitality sector to stand firm and together. He stressed that it is prudent for hospitality leaders to join hands and work together in managing the destination as a whole, and not just the projects under their remit.

The World Travel & Tourism Council (WTTC) forecasts a downward shift in global Travel and Tourism Economy GDP contribution to one percent for 2009, in contrast to ten percent in 2008. However, WTTC also expects the Middle East to buck this trend, suggesting that regional tourism will grow by one percent in 2009. This would place the Middle East as the second growth region in world, behind Asia.

Recent reports however reflect real estate values in Dubai could plummet by 60 percent by the end of 2009, according to UAE investment bank Shuaa Capital. This, after property prices have lost up to 40 percent of value and rents are at risk of sliding by a 20 percent margin this year and the next.

Sources in Dubai such as major residential/ hotel developers who have started resort projects and bought man-made islands from the Palm Island Developers Nakheel intimated their sales of prime developments have been dramatically reduced and that real estate values have been slashed in half since last year. Considering that properties have appreciated in the order of 50 percent of sale price in a few months, sometimes weeks during the boom times, Dubai is now seeing the reverse of the usual return on investment following the global recession. "Prices in Dubai could lose 50-60 percent by the end 2009 from their peak last summer. With negative population growth, expected delivery of 35,000 units in 2009, declining occupancy rates, lack of mortgage funding, high job insecurity, and cancellation of visa guarantees for home buyers, it is going to be tough for the market to show resilience at least in the first half of 2009," said Shuaa Capital’s Roy Cherry.

As if fighting this worsening global challenge, Worsley is hopeful the region will see the market’s turn-around much faster than the rest of the world. “It is again time to look at destination management as a collaborative effort and not just at individual property or project management. Industry leaders need to discuss the big picture and look at how they can collectively manage in-bound traffic and maintain consumer spending levels,” he said.

AHIC’s co-chair tells the industry to be vigilant and proactive in the current economic climate stressing that under such conditions there is little room for error. “The region’s tourism and hospitality leaders need to be particularly alert in these unprecedented times. With tourism long-since stamped as the catalyst of economic growth for a number of regional markets, the sector needs to be quick off the mark and show maturity in handling the current cycle,” he said. Worsley promised that the upcoming Arabian Hotel Investment Conference (AHIC) 2009 (May 2-4 2009) will provide a timely platform for such debate.

Despite the deepening recession, Edmund O’Sullivan, AHIC’s co-organizer, said early interest for AHIC 2009 looks strong from both within the region and overseas. “This is a critical stage in the world markets, and the hospitality investment sector must show confidence and creativity in vision while holding steady in riding the wave,” he said.

Similarly, in Abu Dhabi, the economic slowdown and the corrections to global property prices fail to dampen industry enthusiasm for an international real estate show in the United Arab Emirates’ capital city of Abu Dhabi. While numbers are being crunched worldwide, the show organizers IIR Middle East said available exhibition space at Cityscape Abu Dhabi 2009 is almost more than 85% sold as the event has the support and sponsorship of some of the region's biggest real estate players.

Jones Lang LaSalle MENA Investor Sentiment Survey published in the final quarter of 2008 shows that Abu Dhabi is the GCC (Gulf Cooperating Council) market where real estate market conditions are expected to improve the most over the next 12-24 months. “It is apparent that this market is seeing major growth as revenues from the oil sector are being invested in urban infrastructure and real estate projects within the emirate. The UAE capital of Abu Dhabi is currently one of the most talked about real estate markets in the world," said Mark Goodchild, exhibition director for Cityscape Abu Dhabi.

"While the global property development industry is currently facing certain challenges, Cityscape Abu Dhabi provides a timely opportunity to reassess where the longer-term returns for real estate investment lies," stated Goodchild.

Despite positive outlooks, Cherry said even Abu Dhabi would not be immune from the real estate slump, predicting prices have so far plunged 15 percent and could slide a further five percent.

Dubai and Abu Dhabi forecast riding recession out faster than the rest of the world
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