Destination Guide

Middle East: In the fast lane

With Abu Dhabi hosting Formula 1 and hotel prices in the region hitting an all time high, Jonathan Hart asks - will nothing stop the growth of the Middle East?

Despite these supposed times of blanket budget restraint, there are always exceptions - for example, combined sporting and high profile business networking events such as Formula 1, which continue to defy a strictly mandated travel norm. Budget cutbacks notwithstanding and however allegedly corrupt or tarnished the sport may now be, securing appropriate accommodation for any Grand Prix can be a formidable task for agents who haven't booked and confirmed for their privileged charges at least a year in advance - even for those wielding heavy corporate clout, or claiming access to local suppliers who may promise, for a sizeable consideration in cash or sponsorship in kind, to turn a late availability trick or two for die-hard petrol-heads on surreptitious cost-no object missions.

However, the difference between most Grand Prix venues and this year's newcomer, Abu Dhabi, staging its first F1 in early November, is that busting budgets and overlooking T&E profligacy have become year-round essentials when dealing with the capital of the United Arab Emirates. Big event or no big event, this is now major expense outlay territory and cutting back on hotel spend or quibbling over items such as an upgrade or breakfast included are generally not an option here.

At least for the time being and unless you're producing exceptionally strong volume based on pre-crisis negotiations. Mingle with the smart suits and crisp white dish-dashes in the elegant lobby lounge of the Shangri-La Qaryat Al Beri - one the latest fashionable spots to see and be seen in the UAE - and it's easy to understand why.

Abu Dhabi has been far from immune to global recession, they tell you, in the politely subdued manner appropriate in these parts, where extreme wealth is evident but meant to be understated. Yet, like other Gulf states buttressed by sizeable oil and gas reserves, the emirate has been able to withstand the worst of the fiscal pain, to the point where it has hardly hurt at all.

Besides, they add, as yet there are only so many five-star rooms or suites to go round. Or, for that matter, any category of hotel room - meaning that demand continues to outstrip supply and prices are largely at a non-negotiable high, particularly for newer business interlopers switching from other less prosperous regions and seeking a slice of the marginally slowed but still buoyant local development and investment action. So much so that in the space of a year, Abu Dhabi has rocketed from outside the top 10 to become the second most expensive destination in the world for corporate travellers, according to the latest biannual international hotel survey from HRG (Hogg Robinson Group). Moreover, claims HRG, Abu Dhabi is poised to displace Moscow from the number one ‘most expensive' slot by the end of 2009.

While Moscow hotel rates in local currency terms dipped 10 per cent to an average £268.11 during the first six months of this year, Abu Dhabi was the world's primary top rate builder, increasing its average to £253.36 per night. Not, it seems, for Abu Dhabi any of the burst-bubble humbling recently prevalent in neighbouring Dubai, where hotels have been slashing rates to combat an alarming non-oil related business exodus. Nor for Abu Dhabi any immediate need to offset a crash in real estate values, bow to current corporate culture, re-negotiate downwards or open up some potentially sweetheart longterm procurement deals for big European buyers.

Sustaining a temporary hotel oversupply alongside a continuing stream of new openings - a 1,500-room Atlantis, two Marriotts and a Premier Inn among the latest - has been a problem for the now-largely tourism, incentive and event-oriented Dubai, its credentials as a hub and corporate playground still strong, if less so its ongoing investment potential.

No such problem for Abu Dhabi and other oil or gas-rich neighbours like Qatar and Oman, for whom diversification has been more an option than a necessity, permitting a more gradual introduction of business reforms and a cautious programme of hotel development, primarily at the five star end of the market.

In a similar vein, despite being largely bereft of natural reserves like Dubai, Bahrain has also managed to keep its head above turbulent global waters by virtue of its position as the financial capital of the Gulf Cooperation Council (GCC) and a primary facilitator for business in Saudi Arabia. In addition, a reputed price-fixing cartel and being a venue for FIcan only have helped to boost revenues for Bahrain's recently expanded, but still limited, hotel infrastructure.

The result, together with a general paucity of lower category business hotels, is that the cities of Doha, Muscat and Manama all witnessed average rate increases alongside Abu Dhabi during the first six months of the year, according to the HRG report. Individual economic forecasts vary.

Thanks to liquid natural gas exports, for example, Qatar envisions 18 per cent growth this year. Yet having tripled in size between 2002 and 2008, growth rates generally across the region have slowed to low single figures this year and were recently revised further downwards by the International Monetary Fund (IMF). Nonetheless, as with the most stable, strongest performing economies in recent years across the wider Middle East, including Egypt, the growth forecast for 2010 is several points upwards and import/export figures coupled with investment sentiment remain positive.

In sector terms, significant opportunities still await in energy, travel and tourism, financial and professional services, transport, construction, education and healthcare, according to UK Trade & Investment. This all points to the region emerging stronger than ever from the effects of global recession, says Iain Andrew, divisional senior vice president for Dnata Travel Services.

But it does not preclude corporates currently being well placed to negotiate better rates. With the notable exception of Abu Dhabi, investment in lower category properties has been stepped up and is helping to balance rate demands in the longer-term. At the same time, adds Andrew, suppliers in the region are being encouraged to introduce more flexible policies to help maximise client value and boost compliance, while corporate practices generally are being aligned with those in major source markets like the UK. "We have seen corporates in the Middle East readily adopt new working practices to remain nimble in the current climate and ensure they can anticipate and respond to changes in the operating environment," Andrew says. "Many are migrating to online booking tools to enable them to run up-to-the-minute management information reports, improve travel spend and achieve more control over budgets." Who knows? By the next time F1 comes to Abu Dhabi, perhaps accommodation prices will have become a little more accessible, too.