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UAE contractors and developers eye Abu Dhabi tourism construction

Abu Dhabi’s economic diversification is oiling the wheels of change as construction firms view tourism as an engine for growth

ANALYSIS, Projects, Abu dhabi, Abu Dhabi Cityscape 2018, Abu Dhabi tourism construction, Construction, Development

Abu Dhabi Cityscape, held on 17-19 April, welcomed thousands of attendees and witnessed the unveiling of new projects worth more than $4bn (AED15bn).

Notably, not only did developers announce flagship projects at the exhibition, but most development leaders also expressed optimism about Abu Dhabi’s tourism sector – one that is rapidly growing amid economic change in the emirate.

Government officials have had an eye on developing Abu Dhabi’s post-oil economic model for more than a decade. In 2006, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the UAE Armed Forces, HH Sheikh Mohamed bin Zayed Al Nahyan, called for the development of a long-term economic strategy for the emirate, and accordingly, the Abu Dhabi Economic Vision 2030 was born.

This blueprint outlined 12 sectors the emirate should focus on to deliver economic growth and diversification, and tourism was one of them.

To date, Abu Dhabi has invested heavily in the tourism sector, building a number of acclaimed attractions such as the Louvre Abu Dhabi, Sheikh Zayed Grand Mosque, and the Saadiyat Island Cultural District, with its cluster of museums, cultural, and educational institutions. Recent tourism-focused construction projects include the Warner Bros World Abu Dhabi theme park, estimated to be worth $1bn (AED3.67bn), which will open at Yas Island on 25 July. Then there is the five-star Saadiyat Rotana Resort & Villas, which will open Q3 2018.

Aside from hotels and high-octane theme parks, the Founder’s Memorial, a cultural landmark commemorating the late HH Sheikh Zayed bin Sultan Al Nahyan, also opened in April. The 3.3ha landscaped space on Abu Dhabi Corniche features a centrepiece sculpture designed by US artist Ralph Helmick, called The Constellation. The general manager of the Founder’s Memorial, Yousef Al Obaidli, has called the site a “new landmark” and “major visitor attraction”, saying it will help to strengthen the UAE’s attractiveness as a cultural tourism hotspot.

It is unsurprising, therefore, that property development leaders are excited about Abu Dhabi’s evolution. Imkan’s chief executive officer, Walid El-Hindi, says he hopes more tourists will flock to the city. “The growth of Abu Dhabi is the main factor for Imkan,” El-Hindi tells Construction Week. “We based a lot of our research on [trying to understand] what Abu Dhabi is about. When we researched Abu Dhabi, we found amazing potential for a city that is coming to fruition in the next five to 10 years. I think Abu Dhabi will become one of the top cities in the world. It is already establishing itself as a cultural hub, and with that at the base of the city, there’s no limit to how great it can become. We’re banking on this.”

The Abu Dhabi-based developer, a wholly owned subsidiary of Abu Dhabi Capital Group, may be new to the market, but already boasts 26 projects, including Makers District, Nudra, and Sheikha Fatima Park, each at various stages of development. At least four additional construction contracts will be awarded this year, El-Hindi says, as Imkan looks to roll out new projects in line with Abu Dhabi’s tourism growth ambitions.

Executive director of Aldar Properties, Mann Farid Al-Awlaqi, also expects tourism to boost Aldar’s bottom line. Following the launch of Aldar’s $2.7bn (AED10bn) affordable mixed-use community Alghadeer, Al-Awlaqi tells Construction Week that a rising number of visitors to the UAE’s capital will benefit the company’s prospects: “Tourism growth in Abu Dhabi will benefit Aldar twofold. Firstly, it will deliver an increase in diversified GDP (gross domestic product), which will boost the economy, stimulating demand for property and thus, [driving] population growth.”

Secondly, he explains, will be the advantages that increasing tourist numbers will deliver to Aldar in its capacities as both a development manager, and as an investor.

As an investor, Al-Awlaqi explains, Aldar acquires property that it has either built, or held on to, in line with a pre-determined investment or acquisition strategy. The company’s hospitality activities fall within this umbrella, he says, adding: “We have multiple hotels in Yas Island that are right next to Abu Dhabi International airport.

“These tourists come to the city, and Yas Island is right next to them, which is why you see Aldar’s hotel occupancy rates are much higher than the sector-average across Abu Dhabi.”

Al-Awlaqi says tourism numbers in Abu Dhabi have been growing by around 10% per year, which recent statistics from the Department of Culture and Tourism (Abu Dhabi DCT) reflect. Aldar’s hotel properties, which include the Crowne Plaza on Yas Island, Yas Viceroy, Yas Rotana, and Yas Radisson Blu, have seen their respective occupancy rates continue to increase, Al-Awlaqi reveals. Moreover, Chinese tourists to Abu Dhabi have “surged by 60% year-on-year”, which is a big plus for the emirate, he adds.

Bloom Holdings’ chief executive officer, Sameh Muhtadi, says he hopes year-on-year visitor growth will enhance the revenue that his team generates from its hotels. The developer has a number of five-star buildings in the city, including Edition in the Bloom Marina development, the Marriott Hotel Downtown Abu Dhabi, and Park View on Saadiyat Island.

“We’re hoping the growth of Abu Dhabi will mean more business for our hotels,” he tells Construction Week. “We are not waiting for this to happen, as we have already taken the initiative to diversify in a number of sectors – education, healthcare, facilities management, and community management – so that we can depend on recurring revenue at a rate that is higher than our competitors’. I am targeting 50% recurring revenue over a period of three years, and that’s what we’re working on today.”

But it’s not just developers who say growth in Abu Dhabi’s tourism is a positive development for a market that has historically been less fruitful for contractors than Dubai, according to the chief executive officer of Beaver Gulf Group, Rajesh Kumar Krishna. He tells Construction Week that he is optimistic about growing tourism in the UAE capital: “Abu Dhabi contractors have been really suffering for the last few years because of the low volume of work. The Abu Dhabi market has given them too low a volume of contracts in the last two to three years, but the market is opening up again.”

Krishna explains that while tourism-related buildings are no different than any other project category to a contractor, the rising number of tourism developments could create an opportunity for specialist sub-contractors in the emirate. Moreover, he says, contractors may also see an increase in the need to build ancillary properties: “Tourism projects may have certain features that are unique, such as the Louvre Abu Dhabi’s dome, so you may require some specialised sub-contractors to carry out the project.

“Other than that, it’s all business as usual. Any project of any size, volume, or value is good for contractors. You need affordable housing and hotels too, because not all tourists are the same. So you need to create accommodation that can cater to people from different price points, as well as develop good transportation networks.”

Chief operations officer at Dhabi Contracting, Bishoy Edwards, agrees with Krishna’s view of the benefits that tourism developments will offer to contractors in Abu Dhabi. He says tourism attractions and hotels in Abu Dhabi remain one of the firm’s “key sectors” for construction investments.

He adds: “With new tourism products such as the Louvre Abu Dhabi and Warner Bros World Abu Dhabi, it will be essential to develop new products and more hotels that can cater to increased visitor [numbers] to the emirate. Of course, Dhabi Contracting intends to maintain its interest in this sector, and we will continue to bid, alongside our competitors, on these prestigious projects.”

Tourist visits to Abu Dhabi are expected to increase to six million this year, rising steadily from the 4.8 million overseas visitors welcomed in 2017, according to DCT – a rate of growth that Edwards calls “phenomenal”. It appears that Abu Dhabi’s appetite to entice tourists will pave the way for a greater volume of contract awards, and for construction professionals in the emirate, this can only be a good thing.

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