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Expo 2020 Unlocking Hotel Industry’s Potential Research Paper


Introduction

Dubai will host the prestigious international exhibition World Expo in 2020. It is expected that this international event will promote the rapid development of the city economy, tourism, and hotel industry, and will further reinforce the status of Dubai as a world center of great opportunities for business. The exhibition will adhere to the following slogan: “Connecting minds, creating the future”, and will attract about 20 million visitors to the city in six months (EXPO 2020 Dubai). EXPO 2020 creates the need for the development of hotel industry in order to meet the visitors’ expectations and create the most comfortable atmosphere. This paper will focus on Dubai hotel sector as a beneficial option for investment based on EXPO 2020 peculiarities and goals as well as post-event opportunities.

Executive Summary

EXPO 2020 is an international exposition that will be provided in Dubai to present and discuss various innovative products. The hotel sector is one of the most attractive industries for the investment due to high demand, influx of visitors, and the perspective opportunities with regards to tourism. Currently, the market of the hotel property is rather stable and beneficial for both local and foreign customers, considering adequate market environment and Dubai location. More to the point, the official statistics shows that the hotel sector achieved the excellent results, and even the greater success will be reached in the future. Among the most exciting and promising hotel areas, there are Jumeirah Village, Dubai Parks and Resorts, Al Habtoor City, etc.

Body

Dubai Hotel Industry: Key Points

Over half a century ago, Dubai became one of the most profitable and promising markets for residential and commercial real estate all over the globe. Until 2002, solely the UAE citizens had the right to purchase real estate in this country. However, with the release of Dubai to the international level, foreign investors also received this opportunity. After the reconsideration of the economy, a number of laws and regulations were accepted in the sphere of real estate, and Dubai’s Real Estate Regulatory Agency was also established.

These measures were aimed at regulating the market and ensuring that only reliable building companies would be the participants of the market. The last decade has revolutionized the real estate market in Dubai, giving investors the opportunity to invest not only in residential real estate, but also in commercial, such as hotel rooms and complexes.

Speaking of the trends of the hotel industry in Dubai, it is essential to point out that the sea, the sun, the stability of politics and economy, the high standard of living, and, what is also important, the strategically advantageous geographical location of the country make it an extremely popular place for business and tourism. Considering plenty of development projects in the sphere of hotel real estate, which are already implemented or exist only on paper, one may note that according to the recent study by Jones Lang LaSalle (JLL), apartment prices rose up to 13.46 percent year-on-year, while villa prices growth composed 15 percent (“Dubai Real Estate Market Overview”).

The GDP of the emirate in 2017 also grew by four percent, which also should add confidence to investment. According to the recent estimates, the UAE tourism sector responds to 14 percent of the country’s GDP. Along with the growing interest in the region, one may note the increased density of investment in infrastructure and services. While other countries, including the United Kingdom and the United States, still have to overcome the consequences of the economic recession and financial crisis, the real estate market of Dubai and the UAE in general not only managed to fully recover, but also thrives and attracts foreign investors, thus retaining consumer confidence.

It is expected that the demand for hotels will continue to grow, and thousands of new properties will appear on the Dubai property market in the coming years. The flow of tourists continues to increase, and the hotel and tourism sectors of Dubai will need further growth to maintain the status of the city. That is why investments in hotel real estate, unlike investments in residential complexes, present one of the most attractive options for investors. There are approximately 183 hotel projects under construction in the UAE at the moment, 56 of which are expected to begin operating in 2017, and more than 58 establishments will be offered to visitors in 2018 (EXPO 2020 Dubai). On the threshold of the beginning of EXPO 2020, the pace of construction of hotels was significantly accelerated.

In an effort to increase the supply in the hotel sector, Dubai encourages the construction of an even larger number of establishments, especially those of medium size by exempting the municipality from paying taxes to those establishments that will be issued until the next year. As noted by Ziad El Chaar, the ex-Managing Director of Damac Properties, “to create a key new hub for business and investment, and complemented by world-class facilities, there will naturally be a need for hotel accommodation in the centre of this vital area of the city” (“First Ever Project in Dubai South Completed”).

With this in mind, Dubai expects to prepare more than 100 thousand hotel rooms by the end of 2020 in order to meet the demand of the expected influx of tourists during the exhibition. Currently, the emirate met 6.57 million foreign visitors, which is four percent more than the result of the previous year (EXPO 2020 Dubai).

Dubai Hotel Industry Advantages for Investment

One of the significant advantages of Dubai for investing and doing business there is the existence of a specific tax status. In terms of the tax-free environment, taxes are not levied either on the profits of corporations or on the income of individuals, making it possible to attract qualified personnel to the region. In addition, there are over 70 free zones in Dubai offering investors various benefits, including full ownership and no limits on the repatriation of profits to their homeland (“Dubai Hotel Investment Report”).

The mentioned advantages explain why so many international corporations open their offices in Dubai. The latter, in turn, increases the demand for real estate for the resettlement of employees moving to Dubai. More to the point, hotel real estate there is more affordable than in, for example, Hong Kong and Singapore, which have long attracted both local and foreign investors, seeking to reduce the tax burden on their assets.

The UAE is one of the most politically stable countries all over the globe that contributes to the steadiness of its economy and the hotel sector, in particular. The country always adheres to politics of non-interference in any international conflict. Regardless of conflicts occurring in the territories of other countries of the Middle East, the UAE is interested in peaceful and appropriate conditions for its citizens and guests that is critical for both the reputation and the overall prosperity of the country.

The official statistics prepared by the Department of Tourism and Commerce Marketing of the UAE (DTCM) illustrates that 11 629 578 guests visited the hotels of the emirate in 2014 that exceeded the similar indicator of the previous year by 8.22 percent. The total revenue of hotels in annual terms increased by 9.8 percent, rising from $ 5.93 billion in 2013 to $ 6.51 billion in 2014 (“Dubai Hotel Investment Report”). The revenues per number on an annualized basis were increased by 12 times. In addition, the UAE government decided to cancel the requirement to obtain a preliminary visa for citizens of another 13 European countries.

Thus, for citizens of 28 European countries, visa-free entry into the UAE became possible, which entailed a considerable raise in the number of hotel guests. These results clearly demonstrate the effectiveness of the activities of the government of Dubai to diversify the foreign markets of the emirate. At the same time, the largest increase in the number of tourists was noted among the representatives of the regions for whose inhabitants the UAE is only beginning to gain popularity as a tourism destination. In particular, among the mentioned regions, there are Southeast Asia (14.4 percent year-on-year increase), Far East Asia (12.9 percent increase), and Africa (increase of 10.8 percent).

The impact of the international exhibition 2020 on the hotel real estate market of Dubai can be divided into three periods: before, during, and after the event. The short-term impact (2014-2019) involving both the preparation period and the event itself imply that EXPO 2020 will provide significant benefits for the economy and real estate market of Dubai by enriching it with new projects and ensuring the influx of investors (EXPO 2020 Dubai). However, in the short-term focus, it is necessary to carefully manage the market in order to prevent rapid price increases or excessive construction. At this point, the sentiment of investors is the key factor that influences the dynamics of Dubai hotel market, triggering an increase in investors’ interest in the mentioned city.

During the international exhibition in 2020, hotel real estate will be in the highest demand. It is the sector that acts as the main locomotive for the restoration of Dubai market in the last two years, since the city has one of the highest levels of activity of this segment among all world markets (EXPO 2020 Dubai). According to the recent data, during the first ten months of 2015, the average level of hotel occupancy in Dubai constituted 82 percent compared to 86 percent in 2016. In turn, the Revenue per Available Room (RevPAR) composed 6.5 percent in 2016 (“Dubai Hotel Investment Report”).

In order to reveal the opportunities of the investment in Dubai hotel industry, it seems appropriate to point out some of the most important projects. For example, Dubai Parks and Resorts will host three theme parks and other attractions in Sheikh Zayed Road with the expected value of $ 1.03 billion. In this great resort complex, Lapita Hotel, Legoland water park created specifically for children from 2 to 12 years old and their parents, and Riverland Dubai Park will be located (EXPO 2020 Dubai). As for the theme parks, guests would visit Motiongate Dubai to review the world of cinema and Bollywood Parks.

Another exciting hotel complex to visit is Al Habtoor City – a new residential area with a lot of entertainment in the heart of the city. Located close to Dubai International Financial Center and Business Bay district, Al Habtoor City is one of the most interesting projects of the emirate as it will include the three premium-class hotels as well as luxury residential buildings with 12 penthouse-class apartments.

The area is perfect for both those who decide to live there and guests who will have the widest choice of entertainment. The permanent theatrical performance on water, which will be held in a special theater deserves a particular attention. A pier and a boulevard in the European style will complement the picture. For those who prefer villages and townhouses, it is possible to recommend visiting the rapidly expanding residential community of Jumeirah Village located just a few minutes drive from the venue of Dubai World Expo and Al Maktoum International Airport.

Post EXPO 2020 Opportunities

Perhaps, the greatest benefit from holding any major international event such as the Olympic Games or World Expo is the use of short-term factors to create advantages for the economy and infrastructure of the city in the future. In the long-term, from the point of view of the real estate market, the most significant benefits of EXPO 2020 are the acceleration of the process of implementing a number of large infrastructure projects and an additional impulse to the development of the new district of Dubai World Central located on the south of the city. The detailed ranking and targets of the UAE are represented in Table 1.

The UAE vision 2021.
Table 1. The UAE vision 2021.

It should also be emphasized that the perspective development of Dubai infrastructure would continue attracting visitors for business and tourism, thus making the hotel industry one of the key contributors to the city’s economy. For example, one may note Al-Maktoum International Airport that is the core element of Dubai World Central and one of the largest and most ambitious projects of the so-called “aerotropolis” – the city around the airport (“Dubai Hotel Investment Report”).

In particular, the airport was opened for cargo air transportation in 2010, and passenger transportation began in October 2013. EXPO 2020 will serve as a powerful impetus for the development of the direction of passenger transportation at Al-Maktoum International Airport, which is perfectly located for the guests of the international exhibition.

According to the official report prepared by the First Group, the expansion of the underground is another important aspect of holding the international exhibition in Dubai as the intention to extend the existing red branch of Dubai leading to the Dubai World Central area (“Life After EXPO 2020”). As with other proposed infrastructure improvements, the timing of this expansion will be shifted due to the need to serve EXPO visitors in 2020.

The multimodal center of cargo transportation refers to a less widely reported infrastructure advantage of Dubai within EXPO 2020 that will be the construction for airfreight services in Jebel Ali. The proximity of the new airport to one of the world’s largest operational seaports will create a single free zone for the shipment of goods, which will be a major help for the further development of the re-export sector of the economy of Dubai.

The organization of EXPO 2020 promotes the creation of a new center for conferences and exhibitions in the area of ​​Dubai World Central. The appearance of a specialized world class exhibition center will help to meet the growing demand for the corresponding real estate in this market (EXPO 2020 Dubai). As noted by Reem Al Hashimi, the UAE Minister of State and Board Representative of the Expo 2020 Dubai Higher Committee and Director-General of Bureau Dubai Expo 2020,

Hosting the Expo 2020 is a clear testament to Dubai’s economic excellence and solid competitive fundamentals, which comprise modern infrastructure and advanced legislative systems attracting regional and international investments, in addition to the Emirate’s safe haven status and the social harmony enjoyed by its multicultural community. (Wam)

This is a part of the overall development plan for Dubai and the UAE in general. EXPO 2020 consists of the mosaic that Dubai leaders try to put together. Reem Al Hashimi adds that this event will be preserved as heritage for many years to come since the key task of EXPO is to unite people to exchange ideas that can revolutionize the world for the better during the exhibition and after it. In this regard, the attention is paid to creating appropriate conditions for long-term benefits for both local citizens and guests, for business and tourism, for Dubai and the world.

One may note that even the pavilions of the perspective exhibition reflect its values such as mobility, new opportunities, and environmental friendliness. In other words, the venue of EXPO 2020 will remain a fully functional complex even after the end of the event in 2021 (“Life After EXPO 2020”). It is also worth mentioning that the reputational heritage, namely, that the World Expo is provided in the Middle East for the first time.

Most importantly, the so-called intangible heritage along with the economic one will manifest their effects in two aspects. Firstly, it is profit from investments in the form of human resources: in innovative economy, people are attached to the city due to business, various institutions, and groundbreaking projects (“Life After EXPO 2020”). Secondly, it is the long-term consequences of the exhibition’s influence on the millions of people who would visit EXPO 2020, be inspired by this event and the ideas that will be discussed there, and ultimately would be motivated to change the world for the better.

Conclusion

To conclude, it is essential to emphasize that the hotel industry of Dubai presents one of the most attractive markets before, during, and after EXPO 2020. As it can be observed from the advantages identified in this paper, the mentioned industry is rapidly developing to meet the visitors’ expectations, providing them with the excellent infrastructure, hotel rooms, and entertainment.

Among the key benefits to invest in the hotel industry of Dubai, there are rather attractive tax-free conditions, stable economy, high demand for the sector, a range of perspective projects, geographical location, concentration of business ideas, cultural heritage preservation, and other opportunities. More to the point, Dubai is open for both local and foreign investors and for cooperation between them. Thus, the investment in Dubai hotels will undoubtedly benefit investors, visitors, and the city both in short-term and long-term perspectives.

Works Cited

The First Group. Web.

“Dubai Real Estate Market Overview.” JLL. Web.

EXPO 2020 Dubai. 2017. Web.

“First Ever Project in Dubai South Completed.” Damac. 2017. Web.

The First Group. 2016. Web.

Wam, Milan. “Khaleej Times. 2015. Web.

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