Analysis: Do celebrities help sell properties?
Celebrity endorsements used in Dubai since property market opened up
Ladies dressed in their finest gowns and elaborately applied make-up crush against the doors of the Madinat Jumeirah, jostling with black-suited men similarly desperate to witness the man for whom they have endured the Dubai summer humidity: Shah Rukh Khan.
King Khan, as he is affectionately known, is in town to draw attention to the Royal Estates, a new residential development in Dubai Investment Park, launched by otherwise little-known developers Aristocrat Star Real Estate Development, Pacific Ventures and PAL Development.
The three firms have hired Khan, or ‘SRK’, to endorse the $650mn “affordable housing” project, that perhaps may otherwise have dissolved into the sea of master developments launched in the Emirate in the past 15 months.
If attention was what they were seeking — and they won’t reveal even a rough figure of how much they forked out for SRK — it has certainly worked.
The Royal Estates project garnered more than 600 news articles across the Gulf, India and Pakistan during the two-week period between SRK’s involvement was announced, and his appearance at the Dubai launch event on 6 August. But the more important question is what impact will the actor’s endorsement have on the project’s bottom line?
Aristocrat Star Real Estate group chairman Osman Valli skirts the question, but says the aim is for SRK to create awareness that will ultimately lead to quicker sales.
“A lot of people don’t have to say too much, only one word can pay everything off,” he says on the sidelines of the launch.
The development was yet to sell out at the time of going to print, but analysts believe the endorsement of SRK, or any other respected celebrity, does bring some benefit — even if only initially.
“They get more mileage because of the high-profile names attached to these projects,” says Deepak Jain, Jones Lang LaSalle’s head of strategic consulting for the Middle East and North Africa.
“Selling in the first phase is important for some developers and can determine whether or not it’ll be successful in subsequent selling phases.”
So much fanfare and yet King Khan himself conceded he had no idea about the Dubai property market and whether now was a good time to invest in it.
“As far as investment is concerned, with all due respect to the reputation I have as a businessman… I have no idea at all,” he said during the 6 August press conference. “If today my son was to ask me, ‘is this the right time to invest?’ I’d say, ‘I’m not the guy to ask, go ask someone else. I have no idea’.”
His modesty contrasts with another celebrity endorser of a Dubai project, US billionaire Donald Trump, who is backing the Akoya by Damac development near Arabian Ranches.
However, Trump is putting his money where his mouth is, investing his own cash — although he won’t reveal how much — into the golf course named after him at the centre of the estate. He also comes with a pedigree of successful golf course launches elsewhere in the world.
In Dubai for the launch in May, Trump said he expected his name to add 50% to the value of Akoya by Damac residences based on a newspaper report in Aberdeen, Scotland, where he bought a golf course that has since seen tourist numbers skyrocket.
“I think you’re going to have a huge Trump factor here [as well]. I think it’s going to have a tremendous positive effect.”
The Trump boost would not only affect the golf course and 100 villas in Trump Estates attached to it: “I think it’ll have a spillover beyond this development; I think it’s going to benefit other developments as well,” Trump said.
All that optimism despite his first Dubai project having been scrapped.
Trump Tower was to be a 60-storey building on Palm Jumeirah.
It was a joint venture with Nakheel, the developer that sank into billions of dollars worth of debt when the property market crashed in 2009, but which has recently climbed out of this hole to repay rescheduled loans early.
Celebrity endorsements have been used in Dubai almost since the property market was opened up to foreigners in 2002.
Brad Pitt announced in mid-2008 he would help design an 800-room, five-star hotel in an unconfirmed location in Dubai. It was to be built by development company Za’abeel Investments.
A spokesperson for Graft, the German architecture firm collaborating with Pitt on the project, which it is still promoting on its website, has denied the hotel has been axed, stating that it remains on hold, with an “undisclosed” timeframe.
Dubai Holding, however, confirmed its planned Tiger Woods golf course has been canned. The developer said in July 2013 that the resort, which the former number one golfer was paid $55.4mn to design and promote, had been terminated at the ninth hole.
Other projects endorsed by celebrities that have yet to see the light of day include Michael Schumacher Business Avenue, Boris Becker Business Tower and Niki Lauda Twin Towers, as well as another project on Palm Jumeirah endorsed by actress Hilary Swank.
With so many celebrity-endorsed ventures going so terribly wrong does celebrity marketing simply not work in real estate? Is it Dubai? Is it the celebs themselves?
Jain says it is likely this list of Dubai celebrity projects failed due to the general financial situation, despite dozens of other developments frozen in 2009 since having been revived.
The chief executive of Dubai real estate firm Better Homes, Ryan Mahoney, agrees the global credit crunch probably had the greater impact.
But he says the resurgence in building will likely see celebrities make a comeback in the real estate sector; they help to “cut through the noise” and in a crowded market such as Dubai their endorsement can add a premium to the value of residences, at between 5-10%.
But, Mahoney says, a developer’s reputation for quality will eventually be paramount in a project’s long-term success.
“A lot of people say to me ‘I’m cautious of developers using celebrities or gimmicks because it may be covering up something missing from the product’,” Mahoney says.
“Developers should remember to focus on the quality of the project in terms of design, functionality and so on, to build a track record of well-built and well-maintained properties. A good track record is far more valuable and companies that have a history of delivering good-quality property do not need to bring on the celebs.
“If a developer is intent on getting an endorsement then I think it’s far more meaningful to have a famous architect or a famous design house, or even hotel brand, which will actually add value to the quality of the development by either designing it, furnishing it or managing it.”
Mahoney says using well-known architects and designers also has been successful in cities such as London.
“I’d want everyone to stay focused on the end product,” he says. “Now in Dubai we’re starting to see properties that have been in the market for five-to-six years… now they’ve been here for a while you can weigh up the quality of a building. That makes all the difference for the tenant or final user.
“It surprises me sometimes that there seems to be quite a lot of people not so concerned by the track record.
“But clearly, whatever we think, [celebrity endorsement] works because so many are using them.”
Jain says it is a certain type of developer that is more likely to splash a famous face in front of its project.
“Typically, you’ll not have Tier 1 developers going down this road,” he says. “You typically have Tier 2 and 3 developers, who don’t have a successful track record or who are relatively new in a particular market or trying to develop a project not in a prime location, use celebrities to get that attention — marketing coverage to get some kind of initial pace with respect to sales.
“Typically, a lot of projects’ success is based on sales in phases one and two and, in some cases, to get a premium compared to competitors, it pays to have a celebrity involved.”
But any impact on the value of homes at Royal Estates also must take into account SRK’s endorsement fee — which, if his previous work is anything to go by, is likely to be seven figures. (Pepsi reportedly paid $10m for the actor to appear in a series of ads throughout India — five times what it paid Michael Jackson).
“I don’t ask girls their age and I don’t expect them to ask me my salary,” he replied when asked to reveal his endorsement fee.
SRK also refused to comment on what value, if any, he will bring to Royal Estates, suggesting he also believed the quality of the developer will ultimately determine the project’s success.
“I don’t know if I’m going to add value,” he said. “I think the product by itself is more important than the endorser. At the end of it all if I was to sit down and say the other products I have endorsed were because of me, I think I’m taking away from the importance and the goodness of the product. I have never made that claim, I would never make that claim.”