Luxury hotel operators in Dubai are increasingly exploring new source markets to compensate for a drop in Russian guests.
Kerzner International’s One&Only Resorts, which manages One&Only The Palm and One&Only Royal Mirage on Al Sufouh Road in Dubai, is now marketing its properties in Poland, the Czech Republic, Ukraine and Scandinavian countries. It is, however, not giving up on Russia, where it maintains an office.
Next month, the hotel group will go on a roadshow to Kiev, Moscow and Baku.
“The regional coverage of airlines such as flydubai and Emirates opens up different regions of Russia besides east Europe,” said Brett Armitage, a senior vice president for international sales and marketing at One&Only Resorts. “There is a significant downturn in the Russian market but a stronger increase [in guests] out of Kiev.”
Tourist numbers from the key source market to Dubai declined last year owing to currency fluctuations and low oil prices.
According to a Bloomberg index compiled last year, Dubai was the fourth most expensive destination in the world for a hotel stay after San Francisco, Geneva and Milan.
Last year, the number of tourists to Dubai from Russia, CIS and eastern Europe dropped by 22.5 per cent compared to the previous year, according to Dubai Tourism.
In January, Emirates deployed an A380 on its Moscow route for two weeks when demand was high. Currently, it operates a B777-300ER on its double daily flights to Moscow. The carrier withdrew its regular A380 service in November 2014.
In October, however, it increased its seat capacity by 50 per cent to St Petersburg. The city got its seventh flight per week in December.
The large number of hotel rooms to fill in Dubai also put pressure on room rates. And the emirate has the second-highest number of hotels in the pipeline – 19,846 rooms across 63 hotels in the Middle East and Africa – after Mecca in Saudi Arabia, research company STR Global said yesterday.
Mecca has the largest number of rooms under construction, with 21,068 rooms across 13 hotels.
One&Only Resorts expects to open its 10th property, a 175-room hotel in Bahrain, in the second half of next year. Its first European property in Montenegro is expected to open in the second half of 2018 with 120 rooms.
In the design phase are a 192-room property in Sanya, China, and two in Mexico. One&Only Resorts runs nine properties, including those in Mexico, Maldives and the Bahamas.
In 2014, the Investment Corporation of Dubai (ICD) bought a big stake in Kerzner International.
Istithmar World, a Dubai World subsidiary, already owns a 25 per cent holding in Kerzner. ICD also owns Atlantis, The Palm, which is also managed by Kerzner.
Another Atlantis is coming up in Sanya, and a Royal Atlantis Resort and Residences on the Palm Jumeirah.
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Company Profile
Name: HyveGeo
Started: 2023
Founders: Abdulaziz bin Redha, Dr Samsurin Welch, Eva Morales and Dr Harjit Singh
Based: Cambridge and Dubai
Number of employees: 8
Industry: Sustainability & Environment
Funding: $200,000 plus undisclosed grant
Investors: Venture capital and government
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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