The Takeoff Episode 03: Why Team and Culture Matter for Travel Startups Sponsored This content is created collaboratively with one of our sponsors.
While the United Arab Emirates diversifies its economy by leveraging its location as a global air axis, Dubai and Abu Dhabi are aggressively preparing for visitor numbers that will dwarf those of today.
During the Dubai Airshow in November last year, Abu Dhabi-based Etihad Airways placed orders for 86 Boeing 777/787s, while Dubai-based Emirates ordered $99 billion worth of equipment—including 150 Boeing 777s and 50 Airbus A380s—the largest single aircraft purchase in civil aviation history.
Then in April this year, Dubai International Airport passed London’s Heathrow as the world’s busiest gateway for international travelers.
And yet, Dubai and Abu Dhabi are just warming up in terms of tourism and hospitality development. The two cities in the United Arab Emirates, located 75 minutes apart by car, anchor a region “poised to take off” according to the new Amadeus study: Shaping the Future of Travel in the Gulf Cooperation Council (GCC).
Member nations of the GCC are: Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE.
The paper examines tourism projections over the next 15 years throughout the entire region, but there’s a disproportionately large focus on the UAE. Dubai and Abu Dhabi are leading the GCC’s growth, not just in terms of infrastructure expansion and passenger traffic, but also more globally-attuned socio-political shifts in the public and private sectors.
“Faced with increasing complexity, companies are at the precipice of change,” says Aroop Zutshi, president/managing partner of market research firm Frost & Sullivan, who produced the report. “A region poised for social change combined with a need to grow globally is increasing pressures on companies based in the Middle East to innovate in new exciting ways.”
For some Western travelers, the UAE is saddled with a variety of stereotypes both real and imagined. We contacted Nicholas Clayton, COO of the government-owned Jumeirah Group, to learn how UAE hotels promote to the North American market.
“I can’t think of anywhere else to go to learn in a more friendly and inviting way about this part of the world, and the people who live here, and the history and cultural heritage, than Dubai,” says Clayton. “Here, I have quality lift into the destination, I have quality logistics on the ground, I have quality hotels and all types of leisure activities, dining opportunities and special events. And meanwhile, I get to understand the Arab culture more. I appreciate that they are people of the world just like everybody else, and that some of the differences that we have between some of the cultures are not that big of differences at all.”
Clayton likens Dubai to Singapore. It’s an international gateway city with English widely spoken everywhere that provides easy access into a complex region, with a high degree of safety, stability and infrastructure by Western standards.
“Dubai is very much an international city; I mean, I remember 20 years ago first hearing about Dubai and I had no idea what that meant,” says Clayton. “But today when you talk about world cities, you talk about Tokyo, Hong Kong, London, Paris—and Dubai is on that list now. It’s actually on the same list. Think about that. In 20 years, Dubai has evolved from a complete unknown into a world city. And one of the reasons for that is because in this part of the world, Dubai is a place of tolerance, a celebration of diversity, and it is very much a high-quality destination to live and work.”
The GCC Future of Travel study is organized around five “Big Effects,” all contributing significantly to the UAE’s future growth as outlined in the development strategy initiatives: Dubai Tourism Vision for 2020 and Abu Dhabi Economic Vision 2030. Here’s a breakdown of each of them in the order they’re presented.
1. The Population Effect
The steady rise in expatriate workers moving to the UAE, the importance of family and religious travel, and a comparatively robust natural population growth are contributing to a rise in inter-regional travel within the GCC. The report states: “Pivotal among these trends are a near 30% increase in population, a huge swath of under-15 population, and a desire for large families.”
The total amount of spend by GCC member visitors within the region is expected to jump almost fourfold in the next 15 years, from $55 billion today to $216 million in 2030.
Furthermore, the UAE has yet to fully tap into the growing independent, middle-income and “coming-of-age” segments, both within the GCC and internationally. For example, for the fast-growing base of young Russian, Chinese and Indian leisure and business travelers, Dubai is among their highest in-demand destinations due to the city’s close proximity, modernity, beaches and extensive leisure activities.
“By 2030, China’s middle class will comprise 70% of its total population, while the comparable figure for India will be 50%,” quotes the report. “The impact on the GCC travel and tourism industry will be huge.”
2. The ‘Beyond Oil’ Effect
In economics, the “Dutch Disease” refers to countries that are over-reliant on the exportation of natural resources, while under-developing their manufacturing and services sectors. The UAE’s diversification into aviation, tourism, trade, financial services and other industries is a direct response to that in the era of Peak Oil—the point where we’ve run out of cheap hydrocarbon resource supply.
Through 2030, the UAE is scheduled to invest over $300 billion in new tourism-related infrastructure. Spurring private development, a 10% municipality fee has been waived for new hotels opening before June 2017.
“All of these diversification efforts are yielding results,” reads the Amadeus research. “According to the IMD World Competitive Centre Index, the UAE was ranked as the 26th most diversified economy in the world in 2012, ahead of many developed countries.”
Future tourism growth markets presently under aggressive expansion include cruise and medical travel. The rapid port construction throughout the GCC is expected to attract 2.1 million cruise tourists by 2013. And in Dubai alone, 22 hospitals are planned or under construction to help deliver a total of 500,000 medical tourists to the UAE by 2020.
One of the most wide-open spaces in the UAE ripe for exploitation is the global meetings and convention industry. In March this year, the eighth annual Gulf Incentives, Business Travel & Meetings (GIBTM) trade show hosted 250 international meeting planners and 300 suppliers for face-to-face appointments, followed by the release of the event’s first ever Middle East Buyers Report.
“The number of meetings in the Middle East has grown quicker than in other regions, it has more than tripled over the last decade,” said GIBTM Exhibition Manager Lois Hall.
Martin Sirk, CEO of the International Congress & Convention Association (ICCA), explains, “The Middle East joined the information revolution more recently than most regions, so it is not surprising to see some of the world’s fastest growth rates here, now that excellent meetings infrastructure has been developed, and governments have created knowledge strategies to underpin their economic development agendas.”
“The city benefits tremendously from large congresses,” adds Clayton. “We just had a group from China in, a group called Nu Skin with 16,000 delegates. This is phenomenally helpful for Dubai, because what they do, of course, they create transient demand. So we see groups, incentives and things like that for their value beyond that one occasion.”
3. The Infrastructure Effect
The sheer scale of airport infrastructure in Dubai is unprecedented, with Dubai International welcoming over 67 million international passengers in the 12 months leading up to February 2014. That number is expected to rise to 100 million by 2020.
Last October, the new Al Maktoum International Airport opened at the sprawling Dubai World Center “aerotropolis” outside Dubai with one operating runway. When fully completed in 2027, the world’s largest airport facility will have five runways receiving an anticipated 160 million people annually.
“Dubai is trying to become the node between Asia and South America, which is affecting the future of logistics and mobility on a global scale,” says Professor Dr. Stefan Walter, managing director of the House of Logistics & Mobility (HOLM) at Frankfurt International Airport.
Winning the bid to host 2020 World Expo has further fueled infrastructure development. The destination marketing firepower resulting from being the first Middle Eastern country to host World Expo in its 160-year history is almost unquantifiable, with visitation numbers expected to surpass 25 million people during the six-month exhibition.
The Amadeus study says that after the airline industry, the next largest beneficiary of Expo is the hospitality segment. The Dubai Department of Tourism puts growth as high as 75,000 new rooms by 2020, meaning the city could almost double hotel inventory in six years.
“Hotel business had always been relatively strong during the downturn, but generally, in 2012 it was an encouraging year economically,” says Clayton. “Getting the winning bid for the Expo in ’13 sort of gave that a little bit of a lift. It improved confidence even further. It gave us a reason to think that for the next five years and beyond, Dubai was going to be in a really good cycle.”
4. The Gateway Effect
With Dubai and Abu Dhabi firmly established as in-transit hubs, there’s a push to convert more of that into stopover traffic. In January this year, for example, Abu Dhabi International Airport became the first Middle Eastern gateway to open a U.S. Customs Border Clearance Gate.
The pre-clearance facility makes Abu Dhabi a more attractive fly-through destination for Asian passengers enroute to the U.S. Eastern Seaboard. Furthermore, it is expected to increase U.S. travel figures by allowing passengers to sidestep the inevitable bottlenecks during peak traffic at major eastern U.S. airports.
The UAE’s central location and growing traffic is also impacting trade with Africa in a big way. The report states:
“The GCC is fast emerging as the new gateway to Africa, the last frontier in terms of natural resources such as oil, gas, uranium, and other resources—all of which will be in high demand across the world. With the added advantage of historic, economic, cultural, and strategic bonds with the African countries, the trade potential between the two continents is immense. Dubai alone witnessed a 700% increase in its trade with Africa over the last decade to USD 25 billion…. Direct flights between the two regions have driven rapid growth in passenger traffic as well as cargo volumes, resulting in higher re-exports. Furthermore, economic interests are also drawing more emerging countries from Asia to invest in and trade with Africa, the bulk of which is routed through the GCC.”
5. The Information Effect
Online booking and digital travel content are two areas where the GCC is lagging among global top-tier travel destinations.
“The lack of bookings made online through smartphones is surprising, but represents a massive opportunity for the travel industry to improve its online presence and tap into the UAE and KSA [Kingdom of Saudi Arabia] travelers who, more and more, are using their phones as a digital concierge, “says Ivan Jakovljevic, head of travel at Google, Middle East.
While UAE internet penetration is high at 70.9%, many travel brand sites are not mobile-friendly or highly evolved in terms of content. For regional traffic, there is also a need for the “Arabisation” of content in native languages. Jakovljevic says almost 50% of users in the Middle East use smart phones to book travel.
Presently, airlines dominate 75% of the present $6 billion worth of annual online travel spending in the GCC. Amadeus research suggests that the hotels’ marketshare “has immense potential to grow in the future once the hospitality industry starts viewing the online world as a means to not only widen its base and offer customised services directly, but also lowering its costs. What makes the coming years interesting is that the region is at a tipping point in terms of debit card enablement for online purchases.”
Terry Kane, director of digital strategy at Jumeirah Group, says the hotel company is building a new “digital ecosystem” with a new app and social media channels “designed to inspire and inform at every stage of the consumer journey.”
The Amadeus Future of Travel study ends with a look at the power of social media and trends relating to connected, personalized and sustainable travel. Without mentioning the viral #MyDubai account on Instagram, presently with 79,000 followers, the reports states Instagram is popular in the GCC mostly in the UAE and Saudi Arabia. On the photo-sharing platform, #JumeirahGroup and #VisitAbuDhabi are in the 8,000 follower range; #Dubai has 423,000 followers.
Lastly, we asked Clayton what the UAE offers that’s difficult to find anywhere else, beyond the indoor ski hill.
“The desert and the sheer beauty of it,” he says. “It’s about the changes of colors and the changing of shadows during different parts of the day. Being out there takes you back to tribal culture, and the nomadic history of the region.”