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Hotels look to locate near retail space

Posted by vmsalama on May 5, 2008

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.”


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