Latest figures show that Dubai hotels are going from strength to strength with their best returns for three years. Occupancy levels hit 90.8% in November with average room rates up 3.1% to US$ 360.47 with even bigger leaps in revenue per available room and gross profit per available room – 5.2% to US$ 327.16 and 12.3% to US$ 297.15 respectively. Since the emirate attracted over 9 million visitors last year, with more expected in 2013, the outlook is indeed bright for Dubai’s 105 5-star hotels and the other 500+ establishments. This week alone, the country’s biggest hotel chain operator, Rotana, opened two new properties bringing their Dubai inventory to 15 hotels and 3,800 rooms.
Also helping to fill hotel’s coffers is the Dubai Shopping Festival. Organisers are confidently predicting an 8% increase in visitor numbers to 4.65 million this year with the highest number of tourists coming from Saudi Arabia. The 32-day festival ends on 03 February and is expected to see sales up by 18 % to US$ 4.9 billion.
Even with some major projects coming on stream this year, the outlook for the retail sector is bullish. An upturn in consumer confidence and the impressive growth in tourist numbers will ensure that the malls – including ten new ones such as Jumeirah Beach Village and Jumeirah Residence – continue to perform well.
The RTA ha reported that the emirate’s taxis made 37 million journeys over the past twelve months – a 12% increase on 2011. The taxi sector had a 46.8% surge in net profit to US$ 58.4 million on revenues of US$ 297.0 million. This week Salik charges were reintroduced for taxis in a bid to reduce their passenger numbers and move them to using the metro.
How times have changed! At the turn of the century, there were no buildings higher than 200 metres to be found in Dubai. Now it can boast of having 20% of the world’s tallest 100 towers as well as the top four global residential buildings. Not one to rest on its laurels, last year four of the six tallest buildings completed globally were located in Dubai.
Recent directives from the Ministry of Economy will result in the prices of 2,000 basic food items being fixed for 2013. Not surprisingly, some retailers are upset as they will see their profit margins slashed whilst most consumers will be happy to take advantage of cheaper produce. One possible downside is that suppliers may be reluctant to deliver at capped prices which may result in shortages of certain items.
One Dubai-based company is to invest US$ 90 million in India. Marina Home Furnishings is expected to open up to fifty outlets in the sub-continent over the next five years and is set to expand even further afield to the UK, US and Canada.
With year-end corporate results set to be released as from next week, positive news from Dubai Gold and Commodities Exchange which registered a staggering 137% growth in 2012 to over 9.6 million contracts with a value of US$ 372.8 billion.
It seems likely that there will soon be a total restructuring of Dubai Holding’s US$ 10 billion debt holding following an agreement with four banks – RBS, Commerzbank, Standard Bank and Commercial International Bank – who have now settled their dispute with this arm of Dubai Group. It is reported that the settlement included 18.5% of the debt being repaid in cash plus responsibility for their debts. Thirty five other banks – owed in the region of US$ 1.5 billion – will be offered the same arrangement. For any deal to progress further, there has to be agreement among its other creditors.
Another entity considering restructuring of their debt is Amlak Finance who are in talks with their creditors to restructure US$ 2 billion worth of liability. The Islamic mortgage company is partly owned by Emaar Properties, who this week announced the 28 January launch of The Address Residence Fountain Views. This follows the Q4 sell-out of its 72-storey project, The Address The BVLD last year.
There are unsubstantiated reports that Emaar is planning to divest itself of its retail and Turkish units and list them on the local bourse and Istanbul exchange. Its current share value stands at US$ 1.11 but its significance to the Dubai exchange can be gleaned from the fact that its US$ 6.85 million Thursday trading accounted for 18.5% of the DFMI’s total daily trade of US$ 36.95 million. The market itself is surging closing on Thursday at 1775 – up 1.1% on the week, 9.39% up in 2013 trading and 35.45% over the past year.
The Central Bank has been in the news more than usual recently especially with its declarations on bounced cheques and mortgage lending policy. To try and burst the property bubble before it inflated too quickly again, the Central Bank has ruled that residential mortgages be capped at 50% (60% for nationals) on the purchase of a first property and then 40% (50% for nationals) on the second and subsequent purchases. In some quarters, the news has gone down like a lead balloon.
Because harsh economic reality is at last hitting home and the need to drastically cut costs, many banks have been in the process of slashing their payroll numbers. One such bank, Morgan Stanley Inc, is reported to have made 1,600 employees redundant with the knock-on effect of their Dubai office being downsized. Other financial institutions – including HSBC, UBS, BoA and Merrill Lynch – have already gone through this exercise and reduced their Dubai numbers with others planning to follow suit. Some investment bankers may have to live on their past year bonuses for a while at least.
The economic climate in the eurozone continues to deteriorate with latest data showing that industrial output fell once again, by 0.3%, to a year on year fall of 3.7% and obvious signs that when Q4 figures come out it will indicate the fourth straight quarter of recession.
The World Bank had reduced its 2013 global growth outlook from its original estimate of 3.0% to 2.4% including advanced economies at 1.3%, developing countries 5.5% and China 8.4%. The usual suspects – high unemployment and fragile business confidence – are the causes of this dismal outlook.
Even the lucky country is not immune from the economic downturn with a slowdown in mining with other sectors under pressure because of the high Oz dollar (currently at over 1.05 to the greenback) and weak consumer demand. December unemployment rates rose to 5.4% as the manufacturing sector contracted for the 10th straight month. Undoubtedly, the country has become an expensive holiday destination and the cash-strapped tourists will inevitably seek cheaper destinations. There are some analysts who are also predicting that Australia will see a bursting of its housing bubble this year.
In the US, lawmakers have six weeks to hammer out an agreement pertaining to the spending cuts as well as to agreeing to some sort of arrangement for its pre-determined debt ceiling, currently standing at US$ 16.4 trillion. No doubt that the US will be peering over the fiscal cliff again come the 01 March deadline.
Dubai and the UAE had more pressing things to worry about with the country’s involvement in the Gulf Cup, being played in Bahrain. Having won all of its first three games to progress to the semi-final, Mahdi Ali’s men received a boost. The various emirates’ rulers authorised free air travel, refreshments and tickets for the match against Kuwait – up to 9,000 fans availed themselves of this largesse and saw Ahmed Khalil score the only goal to secure victory and a berth in Friday’s final against Iraq. No doubt the good run will continue and there will be the usual fun and festivities as the celebrations take to Dubai’s roads. We Are The Champions.