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Arabian Hotel Investment Conference (AHIC) - Dubai

The Middle East business outlook for 2007-2010 is great but the political situation is not that good says an expert.Dr Daniel Thorniley, senior vice president – Corporate Network of the Economist Group, said: “Companies look set for three good years of business but the political background will do them no favours.

“That said, companies here have lived with this kind of risk for many years,” said Thorniley, prior to the Arabian Hotel Investment Conference (AHIC), where he will be a key speaker. AHIC is jointly organised by The Bench and the Middle East Economic Digest (MEED) from April 28-30 at Dubai’s Madinat Jumeirah Convention Centre.

More than 800 leaders of the region’s tourism and hospitality sector will take part in the conference held under the theme “Global Aspirations”.

A variety of topics related to the global market place in relation to hospitality development in Arabia, including investment to and from the region will be discussed at the conference.

The forum is held under the patronage of Shaikh Ahmed Bin Saeed Al Maktoum, president of Dubai Civil Aviation, chairman of Emirates Airline and recently cited as the world’s fifth most influential Arab by Arabian Business following Emirates’ claim for compensation from Airbus over the delayed A380.

Thorniley observes that up to two years ago Western multinationals outside the energy sector didn’t take the Middle East very seriously as a business region.

“Things have changed,” said Thorniley citing the double digit growth being experienced by region-based companies as a major pull to the alert multi-nationals who have yet to brave the Middle East.

“As sales and profits in the developed markets became very tight in recent years, agile multinationals turned towards the emerging markets and part of this shift affected the Middle East.”

“Companies in FMCG, food and beverages, packing, industrial products, manufacturing, IT and health realised that there was in fact good business potential in the region. Others are slow to trot,” he observed.

However, Thorniley warns that some markets and sectors are doing better than others and companies must be prepared to manage winners and losers in the region.

“If we take the greater region, we are looking at some 31 countries. Turkey is reporting excellent business results despite a spring 2006 dip. But the Levant region is, not surprisingly, a poor one for business overall.

“Egypt has seen a massive positive turn around in business results in the last two to three years – until about 2004 it had been the worst performing market but the new government has changed the playing field and goals are being scored. The rest of North Africa is a mixed bag but with good potential in Algeria.

“Saudi Arabia has long since been a market operating below potential but this too has changed for the better – companies report double digit growth as an overall expansion takes place in the economy,” he said.

Elsewhere in the GCC, Thorniley shared that Bahrain, Kuwait, Oman and Qatar are doing well for non-energy companies but the markets are generally small and companies don’t get too excited about them: “Saudi aside, companies report that the smaller GCC markets together often equal the real star of the region, the UAE with Dubai at the centre.”

With just five million population, some 80 percent expatriates, the UAE has a GDP 50 percent bigger than Egypt’s – and rising - and its imports are larger than those of Saudi Arabia.

Dubai has sets its sights high and is standing firm as the unequalled hub for companies working in the region, as Halliburton management must have noticed.

However, Thorniley warned of rising costs across housing, salaries and fees and he stressed that competition is becoming more intense.

“In some ways, Dubai is no longer an emerging market. Western companies are complaining of tough competition, from low-price Asian companies, for example.

“Also, the job market talent supply is very tight; the infrastructure is under pressure and traffic congestion infamous. However, when you talk with executives, there are few viable alternatives,” he says.

“The low risk for security is clearly a major positive and most foreign and Arab companies look upon Dubai as the ‘Switzerland of the Mid East’.”

Thorniley suggested that the business cycle looks sustainable over the next three to seven years.

“Clearly if oil prices collapse to less than $30 per barrel, some of the bubble will pop. But despite the recent fluctuations in oil price, demand from China and the US looks like keeping the oil price above $55-60 as an average for the next two to four years.

“At this ticket, liquidity will continue to flow through the better markets, where many are also reporting success in diversifying away from total reliance on standard oil and gas revenue.”

He said that the real measure of sustainable success was that many governments are now keeping more of their petro-dollars in their own local economies boosting construction, investment and infrastructure and social spending.

However, a positive economy aside, he warned that the political outlook is bad.

“In summary, the Middle East business outlook in 2007-2010 is business great, politics awful.

“Companies look set for three good years of business but the political background will do them no favours.”

“That said, companies here have lived with this kind of risk for many years. The political outlook will not improve in the near future and could even get marginally worse.

“But the chance of a major implosion which would destroy the business outlook completely remains ever manageable.”

Meanwhile, AHIC organiser, Jonathan Worsley noted that on the flip side, it was interesting to see that AHIC sponsors were actively pursuing an international growth agenda with one third of Jumeirah’s portfolio now overseas and Istithmar Hotels acquiring hotels in New York and elsewhere.

In addition, Abu Dhabi’s Rotana Hotels, Suites & Resorts currently notches six properties outside of the GCC and is looking to fuel its growth to 42 properties in the next two years. Rotana recently announced a pioneering private placement, and an IPO listing inside three years is mooted by industry consultants.

Worsley said that topics for discussion during the two-day event include opportunities in emerging markets; anomalies of Middle East management contracts; presentation on selected mega projects in the region; residential real estate & hotels – the ultimate combination?; and the future of independent luxury lifestyle hotels in a consolidating environment.

To register for the conference visit www.arabianconference.com
via -TradeArabia News Service


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