The government will have to find additional visitors to fill the rising number of hotel rooms in the emirate as it awaits completion of ambitious tourism schemes
The cars backed up along Al-Karamah Street behind the Abu Dhabi National Exhibition Centre (Adnec) in early March and the queue of vehicles trying to get into the car parks were a sure sign that demand for entry to the Abu Dhabi International Book Fair was still healthy as the six-day event drew to a close.
- 1.5 million - Visitors to Abu Dhabi in 2009
- 1.65 million - Visitors Abu Dhabi hopes for this year
- 25,000 - Planned hotel rooms in Abu Dhabi by 2012
Sources: ADTA; MEED
Inside the conference centre, debris was also still waiting to be cleared away from one of the 12 halls where another event, the International Security & National Resilience Exhibition, had ended two days earlier.
With few existing tourist attractions to point too, and an ambitious string of new ones yet to be completed, Abu Dhabi’s hopes of increasing visitor numbers and filling its ever-increasing number of hotel rooms relies on events such as these.
The state-backed Abu Dhabi Tourism Authority (ADTA) estimates about 1.5 million people visited the emirate in 2009. It hopes to boost that figure by 10 per cent this year and draw in 1.65 million visitors. Some 10 per cent of those who come to the city do so to attend conferences and exhibitions; a far larger proportion comes for simple business meetings.
Although visitor numbers are rising, the number of hotel rooms is growing faster. At the end of 2009, there were 17,000 hotel rooms in the emirate, but with up to 5,000 rooms being added each year, at the current pace, there will be 25,000 by the end of 2012.
The four-star Aloft Abu Dhabi, part of the US’ Starwood Hotels & Resorts Worldwide stable, is one of the newest hotels competing for customers, having opened in November 2009. It sits right in the centre of the Adnec complex and its room occupancy rate has veered from 40-70 per cent in the first two months of this year. Rene Camilleri, the hotel’s sales and marketing director, says that about 20 per cent of its guests come to attend events at Adnec.
He claims that the hotel only needs to fill about one in four of its 408 rooms to break even, but even doing that will become harder in the coming years. Soon there will be far more competition on its doorstep - six other hotels are due to open within a five-minute walk of Adnec in the next few years. They range from the mid-market Premier Inn, part of the UK company of the same name, to the more luxurious Hyatt at Capital Centre, run by the US’ Hyatt Hotels Corporation. Combined, the hotels in the Capital Centre, as the district is known, will have about 5,000 rooms.
Hotels on Yas Island to the east are already finding it challenging to fill rooms when there is no major event happening, according to local industry sources. Some 20 hotels are planned for the island, including the already completed flagship Yas Hotel, which straddles the Yas Marina Circuit used for Formula 1 racing.
When the Formula 1 racing is staged, it is not hard to fill the rooms, but other times of the year are more difficult.
The authorities are hoping the development of attractions, such as the Ferrari World theme park and a number of golf courses, may help to draw in more visitors to Yas Island’s hotels throughout the year. As Troy Lindquist, director of marketing and sales at Ferrari World, says, “you need critical mass” in terms of tourist attractions and Abu Dhabi is only slowing creating it.
Plans to build a Louvre and a Guggenheim museum and the Abu Dhabi Performing Arts Centre in an ambitious new cultural district on Saadiyat Island are impressive, but remain years away from being realised. Futhermore, the development of that island will also bring its own crop of hotel competition - nine hotels are planned in the Saadiyat Beach area alone.
“We’ve gone from a situation where there were few hotels that were nearly full all the time, to one where they need more visitors,” says Gillian Taylor, business tourism manager at ADTA.
Finding additional visitors is the main task now facing ADTA. The authority launched a marketing campaign on 7 March aimed at companies around the GCC to try and entice more businesses to hold meetings in Abu Dhabi. It is offering hotel discounts, free city tours and other incentives to attract more Gulf businessmen and women to the city.
Currently, just 86,000 visitors come to Abu Dhabi from the other five GCC states or the other UAE emirates each year, 10 per cent of whom come to attend conferences.
Since there is little that is distinctive about Abu Dhabi compared to other Gulf cities, ADTA may find that it has to compete on price more than anything else. Little more than an hour up the road is the Dubai International Exhibition & Convention Centre, and less than an hour’s flight away the Qatar National Convention Centre is due to open next year - such facilities are equally suitable for most business users. The growing network of international destinations being added by the local Etihad Airways, which styles itself as the UAE’s national carrier, should help Abu Dhabi realise its ambitions, although here too, it is having to battle in a very competitive local market.
For now, Etihad’s list of 60 international destinations remains more limited than that of Dubai-based Emirates airline, which serves more than 100 cities worldwide.
The latest marketing drive from ADTA comes on top of an existing initiative, known as Advantage Abu Dhabi, which offers financial grants, cost rebates and marketing support to businesses holding events in the emirate. Such initiatives have been designed to fit in with the wider economic development plan for the emirate, Abu Dhabi Vision 2030.
The expansion of the city’s facilities comes at a delicate time for the UAE, with Dubai’s debt crisis and the consequent need for financial assistance from Abu Dhabi weighing down on the UAE capital’s own credit ratings.
On 4 March, US credit ratings agency Moody’s Investors Service downgraded a series of bodies owned by the Abu Dhabi and UAE governments, including ones heavily involved in tourism developments in the emirate, as part of a review process, which began on 9 December 2009.
Among the bodies that suffered, the Tourism Development & Investment Company (TDIC), which is in charge of developing Saadiyat Island, dropped from Aa2 to A1. Aldar Properties, the master developer for Yas Island, was pegged back from Baa2 to Ba1 with a negative outlook, and could yet drop further. Mubadala Development Company, which is developing Sowwah Island into a business hub alongside a number of hotels, was also downgraded from Aa2 to Aa3.
Mubadala and TDIC are viewed as vehicles of government investment, and so are expected to continue to receive government funding in the future as and when needed. Moody’s says the Abu Dhabi government has formally assured it that it fully and unconditionally guarantees the debts of these bodies.
Nonetheless, Moody’s points out that there is no legal obligation for the government to bail out these companies if they get into financial difficulty and the government’s policy towards them could change in the future. Justifying the downgrade for TDIC in early March, the ratings agency said that the authority’s creditworthiness is fundamentally weaker than other Abu Dhabi government entities because of its high exposure to large real estate projects that are in an early stage of development.
Aldar’s new rating of Ba1, which takes it into non-investment grade or ‘junk’ status, reflects the more uncertain nature of its financial situation, its heavy exposure to the volatile real estate market and the lower likelihood of government support for all of its activities, according to Moody’s.
The difficulties facing these companies reflects a wider problem affecting all businesses related to the Abu Dhabi travel industry, in that so many developments, which they are relying on to attract visitors, have yet to be finished. The number of hotel rooms planned means there could be severe overcapacity in the market if the expected influx of travellers fails to emerge. At the same time, hotel operators and developers know that if they do not invest now, they may never be able to gain a foothold in the potentially lucrative market.
It will be good for companies, who will be able to demand more for less when their staff travel to Abu Dhabi, but it may not be so good for the hotels themselves.
Yet after years of relative plenty, those in the tourism sector cannot complain too much if they find that they now have to work far harder to earn a profit. “The hotels had it so good,” says a senior director at one new hotel in Abu Dhabi. “Some of these places didn’t invest a cent for the past 20 years.”
Back then there was no need, due to the lack of competition and the shortage of hotel rooms in the city. But it is clear that the situation will not last for much longer. While the visitors to this year’s International Book Fair still had a fairly narrow range of choices of places to stay, the market is changing quickly. By the time the World Ophthalmology Congress is held in Abu Dhabi in February 2012 - one of the largest international conferences the emirate will ever have hosted - there will be a far wider choice of hotel rooms for the 12,000 expected delegates.
While the authorities will be looking forward to more traffic jams around the convention centre, the hotel operators will be hoping for a similar situation at their check-in desks, but not all will manage it.
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