Green Shoots in the Sand
After a buoyant global market rally and the passing of the so-called bank stress tests in the
Followers of history would have us think again. During the Great Depression investors were head-faked into believing that the initial recovery would be a lasting one -- and they licked their wounds for another four years thereafter.
This week I had the chance to co-chair the Arabian Hotel Investment Conference in
Both in their half hour appearances on stage gave candid assessments of where we are today. The chairman of Dubai World said he would complete all the projects under construction but would delay any new developments, including the one kilometer tower designed to surpass the world’s tallest tower, the Burj Dubai. Sultan bin Sulayem trimmed the sails of his property group Nakheel by cutting 15 percent of the workforce. “Everything that cannot be currently financed will be delayed,” said the development veteran.
Marios Maratheftis of Standard Chartered told the hotel developers that the
Having taken the business temperature as the heat surged in
That, unfortunately, is at the heart of the challenge. Next year is not looking so bright, with credit still scarce and government and corporate debt coming due starting in the autumn. Government officials expressed their confidence that the $10 billion bond offering will go well -- and Sultan Bin Sulayem shared that view for Dubai World, with more than $4.5 billion in need of refinancing in the next year.
The region has been tested before and worked through the challenges. While touring his beach hotel complex via an electric powered abra (boat), Gerald Lawless, the Executive Chairman of Jumeirah Group, compared this economic challenge to the rapid response needed after 9/11 and the Gulf War.
Lawless, a 30 year veteran of the region, said
Beyond the staff cuts, Dubai Inc. has had to respond in force to get visitors in place. Hoteliers like Lawless teamed up with Emirates Airlines to put forth bundled offers. Lawless says that his beach resorts had 97 percent occupancy in April -- but this came at a price, with revenue per available room down 20 percent in the first quarter.
The Jumeirah Group has big expansion plans, but the owner-operator of the iconic Burj Al Arab hotel is also taking a more measured pace. The first of six hotels planned for
After the conference, I took an hour to take in “The Walk” at
At the start of this stroll, I stopped to take in an unusual scene in the Gulf. It was a crane with a giant wrecking ball tearing down an “old” structure. This prime location was being cleared for what seems to be another residence. It was a rare burst of new activity in a city which has been in a big rush for the past two decades, and is taking a pause to spot the green shoots of recovery in these desert sands.
ABOUT THIS BLOGJohn Defterios’ blog accompanies the weekly business program, Marketplace Middle East (MME) that is dedicated to the latest financial news from the Middle East. As MME anchor, John Defterios talks to the people in the know, finding out their opinions on the big business moves in the region, he provides his views via this weekly blog. We hope you will join the discussion around the issues raised.
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