Delays stall Abu Dhabi's tourism ambitions

03 November 2011

Mounting debt has forced Abu Dhabi to delay schemes including its Guggenheim museum. But if the emirate wants to become a centre for cultural tourism, it needs to push ahead with projects

The cancellation of the tender for the structural package for the Guggenheim Abu Dhabi museum has cast doubts on the emirate’s ability to achieve its ambition of becoming a regional centre for cultural tourism.

Abu Dhabi’s Tourism Development & Investment Company (TDIC) received bids in March for the work at Saadiyat Island’s planned cultural district. However, in early October, the client informed contractors bidding on the scheme that it was withdrawing the tender.

It’s hard to tell what will happen with [the Guggenheim project] now. Contractors have had bid bonds returned

UAE-based contractor

The setback is a blow to Abu Dhabi’s plans to grow its tourism market, a key element in the economic diversification set out in its 2030 strategy for development. Under the plan, the emirate hopes to attract 4.9 million tourists a year by 2020 and almost 8 million a year by 2030. According to statistics from the Abu Dhabi Tourism Authority, the emirate recorded 1.8 million hotel guests in 2010.

Cultural district in Abu Dhabi

The cultural district planned for the $27bn Saadiyat island development is central to Abu Dhabi’s tourism strategy. It is hoped the island alone will attract 1.5 million visitors a year by 2018.

“Tourism is a key part of Abu Dhabi’s economic diversification plan,” says a UAE-based economist. “The cultural schemes are some of the most important projects. They will help to create a niche market for its tourism sector.”

So far, progress on the planned schemes has been slow and the cancellation of the tender on the Guggenheim museum has put the future of the emirate’s ambitious cultural projects in doubt.

TDIC financial results ($m)
Total profit369551

“I don’t know whether [the museum] will be completed as planned,” says one UAE-based contractor. “There are about five museums planned, but we are still waiting for them to award one.”

Abu Dhabi set up TDIC in 2006 to attract investment and develop the emirate’s largest tourism and cultural projects. The 27 square-kilometre Saadiyat island is one of the main projects that the organisation was entrusted to develop. It was planned to be a luxury island that would attract tourists and residents.

With an original completion date of 2020, it was envisaged that the Saadiyat scheme would contain several different districts. The highest profile district planned is the cultural area.

In an attempt to differentiate itself from neighbouring Dubai’s tourism sector, Abu Dhabi revealed plans for several cultural projects on Saadiyat island, with exhibits from renowned international museums and artists to raise its profile and increase visitors.

The cultural district area is designed to cover a total area of 2.4 million square metres and contain four museums, with a fifth museum being located in the island’s marina district. These include the Louvre Abu Dhabi museum, the Guggenheim Abu Dhabi, the Zayed National Museum, a performing arts centre and a maritime museum.

Abu Dhabi is being cautious as it doesn’t want to run into further debt. It wants to wait for demand and funding

Regional economist

Some of the other districts on the island have progressed according to plan. In early 2010, the Gary Player-designed Saadiyat Golf Course opened and in early October, the Monte Carlo Beach Club welcomed its first guests. However, progress with the cultural projects has been unexpectedly slow.

The Guggenheim project is scheduled to cover a total area of 30,000 sq m, which would make it larger than the existing Guggenheim museums in New York, Venice, Bilbao, Berlin and Las Vegas. The museum is intended to contain a 350-seat theatre and 13,000 sq m of gallery space.

Piling work began in 2010 and was due to be finished earlier this year. But the cancellation of the structural package tender has stalled the project indefinitely.

“It’s hard to tell what is going to happen with [the project] now,” says a UAE-based contractor. “Contractors have had bid bonds returned, which suggests that it won’t be moving forward anytime soon.”

Guggenheim project delays

It is not only the Guggenheim project that has faced delays. In 2007, Abu Dhabi signed a 30-year cultural agreement with France to enable the UAE capital to build the Louvre Abu Dhabi museum. The proposed $1bn museum has been designed by the internationally acclaimed Jean Nouvel and is scheduled to cover a total area of 24,000 sq m.

As with the Guggenheim project, progress with the scheme has been much slower than anticipated. The project was originally delayed as the client decided to change plans to build the museum under a single design-and-build contract and divide the project into a series of lump-sum tenders. Piling work was completed by Germany’s Bauer in August last year and it received bids for the main construction package in November 2010.

In March this year, TDIC shortlisted Australia’s Multiplex and a joint venture of the local/Australian Al-Habtoor Leighton Group with South Africa’s Murray & Roberts Contractors (Middle East) for the main construction contract. But the contractors are still waiting to hear the result of the tender.

Missed tourism project deadlines

The original completion date for construction work on the Louvre and Guggenheim schemes was 2012. This deadline will now be missed and there is no indication of new timeframes for the projects.

The planned Zayed National Museum is another ambitious cultural project, designed by UK-based Foster & Partners. The museum will feature exhibits from the life of the late Sheikh Zayed bin Sultan al-Nahyan, the founding president of the UAE and former ruler of Abu Dhabi.

This museum is also running behind schedule. Piling work on the project was completed in 2010 and in November last year, the joint venture of Al-Habtoor and Murray & Roberts was awarded the substructure contract. In its projects update report released in April, TDIC stated that the main contractor would be appointed in 2011. However, with no signs of a tender imminent, it appears to be another missed deadline for Abu Dhabi’s cultural plans.

Other schemes proposed for Saadiyat island include a performing arts centre and a maritime museum. The performing arts centre is intended to contain a music hall, concert hall, opera house, drama theatre and an academy of performing arts. The designs for the centre were prepared by Iraqi-British architect Zaha Hadid. The planned maritime museum, designed by Japanese architect Tadao Ando, will contain artefacts and exhibits of the Gulf’s fishing heritage. Both of these schemes are still in the design stage.

The stalling of the cultural district should not come as a surprise. Project delays and cancellations are becoming a familiar story to those involved with Abu Dhabi’s projects market.

After the real-estate market collapsed in Dubai during the global financial crisis, Abu Dhabi offered some salvation to contractors as it began to divert vast amounts of its oil wealth into development projects. However, this did not last for long and 2011 has seen the UAE capital cutting spending budgets across all sectors.

“The Abu Dhabi market has been very slow this year,” says a local contractor. “People thought Dubai was dead, but Abu Dhabi’s not much better.”

TDIC has been unable to avoid cutbacks. After ending 2010 with commercial debt of more than $2bn, TDIC was forced to slash its 2011 budget from AED18.6bn ($5.1bn) to AED13.4bn. The company said it was reducing expenditure as part of the emirate’s decision to revise its growth plans and exercise more financial discipline. The effects of the cutbacks are already being felt by the local construction sector.

“Projects that have started are being finished, but there is not much new work,” says a local contractor.

Cautious spending from Abu Dhabi

Some economists do not see the slowdown in spending in such a negative light. TDIC has recorded a net loss every year since 2008 and a prudent approach is understandable.

“Abu Dhabi is exercising caution as it doesn’t want to run into further debt,” says a regional economist. “It wants to wait until demand and funding are there.”

If the emirate is serious about diversifying its economy, it is imperative that it continues to invest in its tourism sector. As well as learning from Dubai’s mistakes, it can also pick up some positives from its neighbour. In 2011, Dubai has enjoyed the highest hotel occupancy rates in the Middle East, averaging 80 per cent in the first quarter, when much of the region’s other tourism markets were struggling as a result of the regional political unrest.

“People come to Dubai because it is all there,” said an international hotelier at this year’s Arabian Hotels and Investment Conference. “It has tourist attractions, hotels and infrastructure. Tourists will always want to go there.”

For Abu Dhabi to make a name for itself in the tourism industry and meet its economic diversification targets, it must ensure that the setbacks for its cultural district are only temporary and that the delayed schemes eventually move ahead.

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