Hotels look to locate near retail space

by Vivian Salama

The National

The region’s retail and tourism sectors are becoming increasingly interdependent, hoteliers and real estate developers say.

Hotel developers looking to build in the GCC are increasingly seeking sites close to retail space, according to officials in both industries.

“When we look for new locations, the first thing we ask is, ‘Is it near to a mall or shopping centre?’” said Samir Baidas, the vice president of international lodging development for Marriott.

The GCC saw a total of 2,319 new hotel and serviced apartment rooms open in the first quarter of 2008, according to TRI Hospitality consulting. By last year there were a total of 96,138 new hotel and hotel apartment rooms opened in the region. This number is due to increase by 29 per cent by 2010.

International exhibition and publishing company DMG World Media says it expects a demand for up to 400 new malls in the Middle East, North Africa and South Asia in the next 10 years. Operators of Dubai shopping centres say more malls equal more business, particularly as the city seeks to establish itself as a global shopping destination. More than 100 projects worth more than US$70 billion in hotels and leisure tourism activities are underway in the UAE.

“Demand for these services is so strong that there’s enough for everybody to go around,” said Ben Godon, director of Vision, a hospitality asset management firm. “People who haven’t got involved in these mixed-use developments are eager to do so now given the successes of this model.”

The InterContinental Hotel Project opened three new hotels, or 1,000 rooms, in Dubai Festival City this year coinciding with the annual Shopping Festival. Dubai hotels reported occupancy rates between 92 per cent and 95 per cent in January and February thanks largely to an influx of festival goers.

Officials at Festival City estimate that tourists generate 20 to 30 per cent of their retail profits, with many of the shoppers coming from hotels on their premises. “Thirty per cent is obviously very significant,” noted James McCallum, group director of retail for Al Futtaim Group, the developer of Festival City, adding that the numbers were sometimes higher during peak tourism seasons. “There is really no separating the two in Dubai, and that will increasingly become the case in Abu Dhabi looking ahead.”

The Marriott is developing two Courtyard hotel resorts in Saudi Arabia and Kuwait City, both beside major shopping centres. Officials in the hospitality industry say soaring summer temperatures force them to look for alternative methods of entertainment when beaches lose their allure, and air-conditioned retail space is the most practical option. “When families come for a long weekend, they have their families in a secured area, closed, no hassle of transportation, away from the heat, and they can spend the whole day without going away from the business block,” said Mr Baidas.

Retail developers also build malls with the tourism market in mind. In Bahrain, Dubai-based Majid Al Futtaim (MAF) is working on the country’s first City Centre which will be its largest mall. As in Dubai, the key to the prosperity of Bahrain’s retail industry is simple: tourism. In 2007, it generated a record Dh62.39 billion (US$17 billion), a 15 per cent increase on 2006, according to government figures.

Most of Bahrain’s tourists come from the GCC. They included 7.4 million Saudi Arabians in 2006. For mall developers, this is big business. “Malls of this size target tourists and local residents,” said Shahram Shamsaee, senior vice president of retail for MAF Malls. “But of course, when we develop these malls, we have these tourists in mind, especially in this part of the world.” 

Industry insiders say Dubai has excelled in retail tourism, with events such as the Dubai Shopping Festival making it a global retail hub. Since its launch in 1996, the festival has grown significantly. The first festival grossed an estimated Dh2.15 billion (US$59 million) and attracted 1.6 million visitors. Last year it attracted more than 3.5 million visitors, earning Dh10.2 billion.

“Dubai has combined tourism and shopping in a very dynamic way,” said Michael Kercheval, president of the International Council of Shopping Centres (ICSC). “To the extent that tourism development continues at the same level, it will continue to boost retail, just as the rate of retail also encourages tourism.”

Greater Need for Halal Marketing

 

by Vivian Salama

The National

ABU DHABI // A sign on display at the Burger King in the capital’s Al Wahda Mall answers a question more and more customers are asking. “We sell only halal products,” the sign reads. 

Catering to the world’s fastest growing religion of about 1.4 billion people, the rapidly growing halal industry, worth an estimated Dh7.7 trillion (US$2.1 trillion), has broadened in scope in recent years to include everything from food to Islamic fashion and textiles, as well as pharmaceuticals, cosmetics, and even Islamic finance.

Research conducted by Brand Union has found that 70 per cent of Muslims worldwide follow halal standards to some degree. It is therefore no surprise that the industry could easily account for 20 per cent of world trade in food products by 2025, according to the Canadian government’s Agri-Food Trade Service.

However, the implementation of halal standards have suffered a major setback rooted in the global dispute over what qualifies for the designation.

“There are 192 countries under the United Nations banner and there are that many variations of halal,” said Muhammed Munir Chaudry, the president of the Chicago-based Islamic Food and Nutrition Council of America (IFANCA). 

Pamela Pike, a spokeswoman with the Halal Exchange, an international e-commerce business that assists with the online halal trade, said many governments, including the UAE, Turkey, Malaysia and the GCC, as well as halal certification bodies, had attempted to set standards for the industry.

“For the consumers this diligence and structure will be beneficial as it will boost their ability to buy halal with confidence.” 

While most countries in the Middle East and North Africa regard almost all Sharia-compliant products as halal, countries in South and South East Asia limit this designation to food products, following the teachings of Malaysia, a global leader in halal food production.

The UAE has never required businesses to label halal products.

Thus, the push to adopt a global halal trademark is being received with mixed responses. 

“Some of the larger companies, feel like their business will suffer if they put a logo on because some other customers will not like it or they will think that before, your product was not halal,” said Dr Chaudry. “They are afraid of a backlash.”

Industry analysts say that businesses will capitalise far more from this growing industry if retailers and manufacturers put greater effort into branding and marketing their halal products.

“It boils down to gaining the confidence of consumers,” said Duncan James, the strategy director at Brand Union. 

Analysts say Islamic banking, which earns between Dh734 billion and Dh1.84 trillion annually, has been the most active of the non-food sectors in promoting its Sharia compliance, launching many programmes worldwide in line with Islamic guidelines. 

For example, in 1998, HSBC launched its Islamic “Amanah” programme – the Arabic word for safety – making up one of the largest Islamic banking teams of any international bank.

The programme does not just cater to those in the Muslim world, but rather, was marketed as a financial option for those in Europe and the Americas looking for a reputable sharia-compliant bank. Similarly, Barclays introduced “Sharia compliant accounts” in keeping with Islamic standards.

Another active sector looking to boost its portfolio with Sharia-compliant products is the cosmetics industry, worth an estimated Dh2.06bn worldwide. Brands such as ACTIValoe, Sunbreeze and Kandesn have already earned the approval of the IFANCA and various other halal certification boards.

According to Mr James, several industries in the region could do more to capitalise on the halal brand. For one, he suggested the launch of a halal airline, similar to that launched by the Vatican and Italy’s Mistral Air last year, to transport pilgrims to holy sites. “Such an airline could provide halal food, calls to prayer, copies of the Quran in seat pockets, religious programmes on the in-flight entertainment system and separate sections for male and female passengers,” he said.

A similarly ripe industry, according to Mr James, is halal hospitality, particularly women-only hotels, to permit Muslim women to book rooms without a male guarantor, as is required in Saudi Arabia. At this week’s Arabian Hotel Investment Conference, Abdulla Mohamed Almulla, the chairman of the Dubai-based Almulla Hospitality, is due to reveal the details of his $2bn scheme to develop an Islamic-compliant hotel brand portfolio.

“There may even be opportunities for malls to brand themselves as all-halal in the region,” speculated Mr James. “There are so many retail opportunities out there that no one has really taken advantage of.”