The country’s food and beverage sector will need to more than quadriple in size over the next five years to meet demand from hotel and retail projects currently under development in Dubai.
About 19,000 extra f&b outlets are expected in the UAE by 2019, according to Euromonitor International, which also says that there are currently 6,021 outlets in the Emirates.
“High growth rates witnessed over [the] last five years are expected to continue over the 2014-19 period, with sales values expected to show an average 8 per cent annual growth,” says Nikola Kosutic, a research manager for Euromonitor.
Last year 11 million tourists, a rise of 10.6 per cent over 2012, checked into Dubai’s 611 hotels and hotel apartments. By 2016, Dubai is expected to add 139 properties, including 91 hotels and 48 hotel apartments, according to the Department of Tourism and Commerce Marketing.
Hilton Worldwide has eight properties under development in the UAE with about 34 new f&b concepts being developed for its upcoming hotels. The group has about 117 restaurants and bars currently operating in the UAE and will have more than 150 f&b outlets after expansion.
“I have found that Dubai has a serious food culture and that is what we are tapping into,” says the three-star Michelin celebrity chef Heinz Beck. “If you are a restaurant in a hotel, you cannot expect the guests to keep your business afloat, it has to be the local market and I have found the local market very strong and willing to try new concepts.” Beck recently opened his fine dining restaurant Social in the Hilton’s Waldorf Astoria on The Palm Jumeirah.
Consumer demand for f&b is strong at the emirate’s beach hotels, operators say.
“I had brands constantly asking for a place in the hotel. We are on the beach with two standing-room-only outlets, Barasti and Bussola,” says Tolga Lacin, the general manager of Mina Seyahi Complex.
China Grill, originally a New York-based restaurant, is expected to bring 400 to 500 people a night to the complex’s Westin property.
“I don’t see a bubble because hotels needs brands to draw people in … it doesn’t take too much brain power to see you need a concept that works and works well to compliment the hotel,” says Terry Zarikian, China Grill Management’s director.
Restaurant chains, which in the UAE account for more than one third of total sales or Dh11 billion, are growing on the back of higher consumer spending.
“With the increasing appetite for out-of-home dining and growing discretionary wealth in the Middle East, there is plenty of room for restaurant brands to expand their business,” says Gary Moore, the regional vice president and general manager, Middle East and North Africa (Mena) of the casual restaurant chain, Applebee’s.
“Dining out is becoming a favourite activity for many UAE residents, who spend an average of Dh841 on restaurant meals per month, the highest in the Middle East market.”
More than 70 per cent of households in the GCC have disposable income in excess of US$25,000 and another 3 per cent of UAE households are expected to join this group over the next five years.
Marka, the group that listed on the Dubai Financial Market this year, is tapping into this growing segment with its own brand, Taste of Italy, using the name and expertise of the aforementioned chef Beck as a celebrity endorser and menu creator for its new concept.
“We are opening five outlets, Taste of Italy by Heinz Beck, in the short term and see 50 open in the medium term,” says Ravi Chandran, the managing director of Marka Hospitality.
“There are a lot of food choices in Dubai, but very good outlets don’t really exist unless you go to a luxury hotel — these will be in your neighbourhood and more than affordable.
“We have looked at what the Emirati client wants and built on that. It will be 80 per cent restaurant and 20 per cent retail, selling authentic herbs, pastas, sauces that underline the passion for our food,” he says.
Total gross leasable retail space is around 2.9 million square metres in Dubai and 2.2 million sq metres in Abu Dhabi, according to JLL.
In Dubai “while size still matters [Mall of the World], some developers are shifting their focus to community and neighbourhood centres. Three such malls are scheduled for completion over the last quarter of the year,” according to JLL, with more than 500,000 sq metres to come online by 2016.
Around 400,000 sq metres of retail space is forecast to be added in Abu Dhabi this year after the launch of Yas Mall and “recent announcements of new super regional malls such as Sowwah Central, Saadiyat Mall / The District and Reem Mall together with the planned Marina Mall extension will increase Abu Dhabi’s retail supply significantly by 2017 -18”, according to JLL.
The Dubai developer Meraas, which has delivered The Beach with 44 f&b outlets and Phase 1 of City Walk with 27 outlets, would not comment on the extent of f&b needed for future retail projects.
However, more retail and entertainment space is forecast to be delivered in the second quarter of next year for phase 2 of the 1 million sq feet City Walk.
There is a real risk of oversupply to the market, according to operators.
“There are too many restaurants and we will see some closing over the next year,” says Hiba Kosta, a restaurateur and managing partner at Chez Sushi. “There will be a massive filtration because too many people without experience are opening up and that rarely succeeds. It’s easy for people to put their money in f&b and there are always people with money in this region looking for a safe haven. There is definitely an oversupply in the market at present.”
Operators are adding to the bottom line from the growth in demand from delivery customers.
“It accounts for nearly 40 per cent of our business,” says Ms Kosta.
A further risk to the sector’s outlook is an undersupply of qualified staff and the resulting escalation in salaries for well trained and skilled employees.
Glee Hospitality, which manages 14 of its own brands and builds concepts for other investors, expects a major problem ahead.
“One of the toughest things to get the right is the recruitment of qualified staff,” says Abdel Kader Saadi, the managing director of Glee Hospitality. “We see people moving for higher salaries, which means replacing them and more visa fees, recruitment fees, then new training and seeing the time you have lost.”
Last month, data showed that Dubai inflation jumped to 4.2 per cent in September, up from August’s figure of 3.5 per cent. Countrywide inflation rose to 2.9 per cent, while Abu Dhabi inflation hit 3.7 per cent.
“We manage 400 people and salaries have increased 10 to 15 per cent in the last year. Housing is another problem, which you have to provide otherwise the waiters and waitresses will not be able to live in Dubai. It means the good, trained staff are worth a premium,” says Mr Saadi.
“Big groups can move their staff around between busy and less busy outlets, smaller operators cannot so they get squeezed by the salaries.”
ascott@thenational.ae
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