A study of opportunities and threats emerging from the current and likely future tourism development in Dubai

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AB BS ST TR RA AC CT T

A

This research project assesses the current and likely future tourism development in Dubai. Particular reference was given to the concept of sustainable tourism development. It was to be answered, whether the current scale of tourism development in Dubai is likely to be sustainable. In order to answer this question, the author has used several frameworks for assessing Dubai’s current scale of tourism development and its strengths and weaknesses as a tourist destination. Moreover the concept of sustainability has been introduced in this project. The importance of sustainable tourism development in Dubai had to be assessed; hence, the author demonstrated a choice of Dubai’s approaches towards sustainability. Finally recommendations are given of how to further tourism development in Dubai should be realised.

The research findings show that Dubai’s strategic tourism development is focused on quantity rather on quality. 20 years ago, Dubai consisted mainly of desert, today countless hotels, theme parks, and even artificial islands are being built to meet the current demand and to attract more tourists. Such a rapid development is not without criticism in terms of major negative sociocultural and environmental impacts. This piece of work highlights these impacts and points out whether they can be overcome or not.

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TABLE  OF  NA

ABSTRACT   3

1  INTRODUCTION  10

1.2  PURPOSE OF THE STUDY  10

1.3  COUNTRY OVERVIEW  12

2  LITERATURE REVIEW  15

2.1  THEORIES ON THE TOURISM INDUSTRY  15

2.1.1  TOURISM PLANNING DEVELOPMENT AND MANAGEMENT  15

2.1.2  THE TALC MODEL  16

2.2  IMPACTS OF TOURISM  18

4.3  THE CONCEPT OF SUSTAINABILITY  19

2.3.1  SUSTAINABLE TOURISM DEVELOPMENT  19

4.4  SWOT ANALYSIS  22

3  METHODOLOGY  24

3.1  WHAT IS RESEARCH  24

3.2  RESEARCH FAMILIES  24

3.2.1  SECONDARY DATA  25

3.2.2  PRIMARY DATA  25

3.3  RESEARCH TECHNIQUES  26

3.3.1  INTERVIEW  26

3.3.2  QUESTIONNAIRES  26

3.4  KEY CONCEPTS  27

3.4.1  VALIDITY  27

3.4.2  RELIABILITY  28

3.4.3  GENERALIZATION  28

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3.4.4  TRIANGULATION  28

3.5  ETHICAL ISSUES  29

4  RESEARCH FINDINGS  30

4.1  ANALYSIS OF TOURISM DEVELOPMENT IN DUBAI  30

4.1.1  TOURISM PLANNING IN DUBAI ACCORDING TO COOPER S FRAMEWORK  31

4.1.1.1  Tourism Policy  31

4.1.1.2  Marketing Strategy  32

4.1.1.3  Taxation Structure  32

4.1.1.4  Infrastructure Developments  32

4.1.1.5  Education and Training  33

4.2  THE TOURISM PRODUCT IN DUBAI  33

4.2.1  TYPES OF TOURISM  33

4.2.2  VISITOR PROFILES  35

4.2.3  CURRENT PROJECTS  36

4.3  APPLICATION OF THE TALC MODEL TO DUBAI  37

4.4  IMPACTS OF THE TOURISM INDUSTRY IN DUBAI  39

4.4.1  ECONOMIC IMPACTS  39

4.4.2  SOCIOCULTURAL IMPACTS  41

4.4.3  ENVIRONMENTAL IMPACTS  42

4.5  SUSTAINABLE TOURISM DEVELOPMENT  43

4.5.1  THE NEED FOR SUSTAINABLE TOURISM DEVELOPMENT IN DUBAI  43

4.5.2  APPROACHES TOWARDS SUSTAINABILITY IN DUBAI  45

4.5.2.1  The Al Maha Desert Resort  46

4.5.2.2  Environmental Master Plan  46

4.6  PRIMARY DATA ANALYSIS  47

4.7  SWOT ANALYSIS  50

5  CONCLUSION AND RECOMMENDATIONS  52

5.1  EXAMINE THE KEY CHARACTERISTICS OF CURRENT AND LIKELY  NA

TOURISM  DEVELOPMENT IN DUBAI  52

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5.2 ASSESS THE POTENTIAL OF DUBAI AS A TOURIST DESTINATION WITH

PARTICULAR REFERENCE TO SWOT ANALYSIS .......................................................... 52 5.3 ANALYSE POSSIBLE THREATS TO TOURISM DEVELOPMENT IN DUBAI................. 53 5.4 ASSESS THE IMPORTANCE OF SUSTAINABLE TOURISM DEVELOPMENT IN DUBAI 53 5.5 FORMULATE RECOMMENDATIONS AS TO HOW FURTHER TOURISM

DEVELOPMENT IN DUBAI CAN BE REALISED ................................................................ 54

II TABLE OF FIGURES

III GLOSSARY IV BIBLIOGRAPHY V TABLE OF APPENDICES

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TABLE  OF  NA

FIGURE  RECENT TREND AND OUTLOOK FOR GDP GROWTH IN THE UAE IN  13

FIGURE  DUBAI S SECTORAL STRENGHTS IN LIGHT OF GLOBAL FUTURE GROWTH  14

FIGURE  TALC MODEL BY BUTLER  16

FIGURE  ADOVACY AND CAUTIONARY PLATFORM  20

FIGURE  SWOT MATRIX  22

FIGURE  TOURISM RELEVANT NUMBERS  30

FIGURE  INCENTIVE TRAVEL DESTINATIONS  35

FIGURE  HOTEL GUESTS BY NATIONALITY  36

FIGURE  DRAFT OF CURRENT PROJECTS IN DUBAI  37

FIGURE  INTERNATIONAL VISITOR ARRIVALS IN THE UAE  38

FIGURE  ECONOMIC BENEFITS AND COSTS  39

FIGURE  TRAVEL TOURISM CONTRIBUTION TO UAE S ECONOMY  40

FIGURE  ENVIRONMENTAL IMPACTS ALONG THE VALUE CHAIN  42

FIGURE  TCCI SCORE VS ENVIRONMENTAL SUSTAINABILITY  44

FIGURE  POSITIVE AND NEGATIVE IMPACTS OF TOURISM DEVELOPMENT IN DUBAI  48

FIGURE  DUBAI SWOT ANALYSIS  50

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III GLOSSARY

DTCM Department of Tourism and Commerce Marketing

GCC countries Gulf Cooperation Council (Saudi Arabia, Kuwait,

Bahrain, Qatar, United Arab Emirates, Sultanate of Oman)

GDP Gross Domestic Product

Gulf States Saudi Arabia, Bahrain, United Arab Emirates, Qatar,

Oman, Kuwait

MICE Meetings, Incentives, Conferences, Exhibitions

TALC Tourism Area Life Cycle

TTCI Travel & Tourism Competitiveness Index

UAE United Arab Emirates (Dubai, Abu Dhabi, Ajman,

Fujairah, Ras al-Khaimah, Sharjah, Umm al-Quwain)

WTO World Tourism Organisation

WTTC World Travel & Tourism Council

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PART ONE:

INTRODUCTION

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1

I IN NT TR RO OD DU UC CT TI IO ON N 1

1. .2 2 P Pu ur rp po os se e o of f t th he e S St tu ud dy y 1

“In the words of Donald Trump Junior of Trump International Hotels, ’It is an incredible place. What they are doing is amazing. They are limited purely by their imagination and the law of physics.’” (Oxford Business Group, 2007, p.173)

Within 30 years Dubai developed from a small fishing country to the fastest growing tourist destination in the world. Even as recently as 10 years ago, Dubai boasted just two resort hotels. It began as one of the least resource-rich states in the Arabian Gulf - today it is seen to become the new economic and cultural capital of the world (Zacks, 2007).

The confidence in what Dubai has to offer as a destination is backed up by the development of some of the most impressive tourism projects in the world. Especially in 2007 the projects that caught attention include such high-scale projects as The Palm, Hydropolis, Dubai Marina, Burj Dubai, Dubailand, Dubai Maritime City and Dubai Waterfront (Oxford Business Group, 2007, p.144). All these projects maintain that Dubai is planning to be one of the world’s most famous tourist destinations – and it seems as if they are succeeding. Regarding the current development in the emirate, “the signs are positive for continued growth in Dubai's tourism market”, said Khalid Bin Sulayem, Director General of Tourism and Commerce Marketing (DTCM) for the Dubai Government.

At present, there are 47,000 hotel rooms in Dubai, that figure is expected to triple by 2015 (Florian, 2008). This rapid development is not without criticism. According to Reinier de Graaf, director at the Office for Metropolitan Architecture, “things happen in such a speed … and with so little governmental oversight that to find one person with a complete grasp of what’s going on is a very difficult task.” (Zacks, 2007)

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To highlight the point of issue, it is important to mention the goals of tourism development in Dubai:

DTCM defines its mission as “The development of sustainable tourism.” (DTCM Website). Additionally, the ruler of Dubai, Mohammed bin Rashid al Maktoum, defines his goal as follows:

“Building on our achievements, preserving our national assets, and achieving comprehensive and sustainable development, we have directed that our current programs be further developed and that a strategic plan be prepared in light of the latest developments and changes.” (Dubai Government, 2007)

To meet the huge present demand countless new hotel resorts are being built as well as artificial islands and the world’s biggest airport. Whenever such a rapid development takes place the concern of sustainability arises. According to the Travel & Tourism Competitiveness Report 2008 established by the World Economic Forum, Dubai is ranked 122 out of 130 countries regarding the environmental sustainability. “A country’s level of environmental sustainability can be determined by its input measures, such as regulatory policies, and output measures, such as the eco-footprint of a country’s tourism sector (…) and the behaviour of private operators in the industry.”(Ringbeck, Gross, 2008, p.28)

Regarding these contradictory facts, the governmental goal of sustainability on the one hand and the bad results concerning environmental sustainability on the other hand, have leaded the author to ask whether sustainable development can be reached in Dubai.

Consequently, this project will seek to examine the nature of tourism development in Dubai as well as the emerging opportunities and threats with particular reference to the concept of sustainable tourism development.

Thus, the author could formulate the following objectives for this research:

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These objectives lead to the following question, which is to be answered after the research:

Is the current level of tourism development in Dubai likely to be sustainable?

Co ou un nt tr ry y O Ov ve er rv vi ie ew w 1. .3 3 C

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Dubai is located along the southern coast of the Persian Gulf on the Arabian Peninsula. The country borders Saudi Arabia to the west and south, and Oman to the east. It is one of the seven emirates of the United Arab Emirates (UAE).

To the south, the dunes of the Rub Al Khali, the largest continuous sand desert in the world, are located. Along the border of Oman some mountainous terrain can be found. The climate in Dubai is very dry with a minimum of rainfall during winter months. The temperature is pleasant for half of the year, although temperatures in summer surpass 50°. (For a detailed map of the UAE please see appendix 1)

With 1,4 million inhabitants Dubai has the largest population of the UAE and has seen steady 8% annual growth since a decade. The constant flow of expatriate workers is reflected in the unofficial figure of 2 million inhabitants. Expatriates make up over 90% of Dubai’s population. Studies suggest that at least 1million Indian workers live in the UAE, which makes them the country’s largest expatriate population by origin. The population is expected to grow in the coming years, reaching 5million by 2020 due to steady immigration. Despite all efforts, the number of UAE nationals in Dubai is expected to be less than 1% by 2020. (Oxford Business Group, 2007, p.8)

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Due to immense oil reserves the UAE’s has one of the highest per capita GDPs in the world with 34,109 US-Dollar in 2006 (World Bank, 2007). The establishment of free zones has lead economic liberalisation to the degree that it is now one of the most open economies in the world.

FIGURE 1.1: RECENT TREND AND OUTLOOK FOR GDP GROWTH IN THE UAE IN %

14 12 GDP growth rate 10 8 6 4 2 0 2001 2003 2005 2007 2009 Year

Source: Own preparation following Mintel Country Reports, No 4 Middle East, p.11, London 2007

The current economic success was mainly driven by government policies aimed at improving the business and investment environment, additionally establishing specialized zones and mega projects that helped to attract Foreign Direct Investment. Other factors that supported economic growth are such as availability of labour and land for major real estate projects, good infrastructure and a solid institutional framework. (Dubai Government, 2007) Dubai in particular has experienced an annual growth rate of 13% since the year 2000, which is exceeding that of its UAE counterparts.

Dubai’s economy has diversified in the last few years to reduce dependence on petroleum. Tourism development is the most important element of this diversification. (Horner & Swarbrooke, 2004, p.105) Moreover real estate, finance services, trade and

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construction are part of the diversification away from oil, which seems to be successful: in 2005 the non-oil sector contributed 95% to GDP. (Dubai Government, 2007) The following figure underlines the strengths and weaknesses of Dubai’s economy.

FIGURE 1.2: DUBAI’S SECTORAL STRENGHTS IN LIGHT OF GLOBAL FUTURE GROWTH

Source: Dubai Government (2007)

However, the current economic downturn worldwide shows already its first impacts on Dubai: money is not so freely available, the frenzy-driven real estate market has cooled down and the stocks of developing companies, for instance ‘Nakheel’, are stumbling (Hauser).

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2 L LI IT TE ER RA AT TU UR RE E

R RE EV VI IE EW W 2

Th he eo or ri ie es s o on n t th he e t to ou ur ri is sm m i in nd du us st tr ry y 2. .1 1 T

2 According to Pender & Sharpley (2006, p.4) there is no universally agreed definition of the tourism industry; it is even unsure whether tourism can be described as an industry. Mill-Morrison (1998, p.2), for instance, argues that it is difficult to describe tourism as an industry due to a great deal of complementarities, meaning the interplay of tourists, businesses and environments, as well as competition among the different tourism businesses.

The most widely accepted definition was formulated by the World Tourism Organization (WTO) and provided at the International Conference on Travel and Tourism Statistics in Ottawa in 1991:

“The activities of a person outside his or her usual environment for less than a specific period of time and whose main purpose of travel is other than exercise of an activity remunerated from the place visited.” (Chadwick, 1996, p.66)

Another definition that is endorsed by the International Association of Scientific Experts on Tourism regards tourism as a complex of environmental impacts (Hunziker & Krapf, as cited in Leiper, 2004, p.41):

“Tourism is the sum of the phenomena and relationships arising from the travel and stay of non-residents, in so far as they do not lead to permanent residence and are connected with any earning activity.”

2. .1 1. .1 1 T

2 To ou ur ri is sm m P Pl la an nn ni in ng g, , D De ev ve el lo op pm me en nt t a an nd d M Ma an na ag ge em me en nt t The WTO suggests that developing and managing tourism requires essentially tourism development policies. These policies should be based on the aims of tourism development in the country in order to integrate tourism appropriately. The tourism industry makes an attractive development option, especially for countries whose economy is or respectively was dependent on a specific sector like Dubai. In this case tourism is used as an important contributor to diversify away from the oil sector. In order to make efficient use of tourism as an option to diversify the economy, tourism development needs to be controlled and planned properly.

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According to Cooper et al (2003, p.314), tourism planning manifests itself in a variety of forms including:

- Tourism policy

- Marketing strategies

- Taxation structure

- Infrastructure developments

- Education and training How tourism planning and development have been realised in Dubai will be assessed in chapter 4.1.

2. .1 1. .2 2 T

2 Th he e T TA AL LC C- -M Mo od de el l The Tourism Area Life Cycle Model (TALC) was developed by Butler (1980) for understanding the development of a tourist destination.

FIGURE 2.1: TALC-MODEL BY BUTLER

Source: Butler, 2006

It identifies five different stages of tourism development: