Island of wealth in an ocean of red ink TheStar.com - Business - Island of wealth in an ocean of red ink
Dubai's $1.5B Palm Island opens, but global money crisis may hurt its success
September 28, 2008 Adam SchreckBarbara SurkAssociated Press
DUBAI, United Arab Emirates–It's the latest word in Persian Gulf excess: a $1.5 billion (U.S.) resort boasting a $25,000-a-night suite and dolphins flown in from the South Pacific – all atop an island built in the shape of a palm tree.
Environmentalists have long criticized both Palm Jumeirah island and some of the features of the Atlantis hotel, which opened earlier this week. And analysts wonder if global financial turmoil will crimp Dubai's big hopes for tourists.
Dubai is not blinking, though.
The 113-acre resort on the artificial island off the coast is among the city-state's biggest bets that tourism can help sustain its economy once regional oil profits stop flowing.
"You don't build a billion-and-a-half dollar project just anywhere in the world," said Alan Leibman, president and managing director of Kerzner International, the hotel operator that teamed with Dubai developer Nakheel on the resort.
With its own oil reserves running dry, Dubai hopes to woo those eager to make money and those who know how to spend it – even as much of the global economy sours.
For years, the emirate – one of seven semi-independent states that make up the United Arab Emirates – has been feverishly building skyscrapers and luxury hotels.
A key piece of the strategy has been to cultivate an image in the west as a sun-kissed tourist destination despite its intense summer heat, conservative Muslim society and dearth of historic sites.
Among the daring projects are an indoor ski slope, the as-yet-incomplete world's tallest skyscraper and a growing archipelago of man-made islands such as Palm Jumeirah – the smallest of three such projects planned.
Much of the focus at the Atlantis, modelled on a sister resort in the Bahamas, is on ocean-themed family entertainment. The resort has a giant, open-air tank with 65,000 fish, stingrays and other sea creatures and a dolphinarium with more than two dozen bottlenose dolphins flown in from the Solomon Islands.
The hotel's top floor aims squarely at the ultra-wealthy. A three-bedroom, three-bathroom suite complete with gold-leaf, 18-seat dining table is on offer for $25,000 a night.
Environmental groups and some people in the Solomons protested the sale of the dolphins to the resort as well as the 30-hour plane flight to get them to Dubai.
Dubai's development has long been criticized by environmental activists, who say the construction of artificial islands hurts coral reefs and even shifts water currents. They also point to growing water and electricity consumption.
Developers seem undaunted. For the moment, the Atlantis shares the island only with rows of high-end houses and construction sites. But other international names are set to move in.
Donald Trump plans a hotel straddling the centre of the tree-shaped island's "palm," and the storied QE2 ocean liner will become a hotel and a tourist attraction docked alongside its ``trunk." An 1,800-seat theatre nearby will house a permanent Cirque du Soleil show beginning in the summer 2011.
"Palm Jumeirah in and of itself will become one of Dubai's major tourist attractions," said Joe Cita, chief executive of Nakheel's hotel division.
Boosting the number of attractions on the island will not only entice more visitors, but also persuade them to spend more time and money in the city, he said.
By 2010, Dubai aims to attract 10 million hotel visitors annually, up from about seven million in 2007. Atlantis alone will increase the city's hotel capacity by 3 per cent.
So far, demand appears strong. The Middle East had the highest hotel occupancy rates in the world during the first half of the year, with Dubai leading the region at 85.3 per cent, according to Deloitte Touche Tohmatsu.
Dubai also had the highest room rates in the region, although revenue growth is slowing, Deloitte noted.
Atlantis' backers are optimistic they can fill its 1,539 rooms despite the economic uncertainty wracking some of the world's richest economies. Their focus is on well-heeled travellers from Europe, Russia, Asia and elsewhere in the Middle East.
"People will still take family holidays," Leibman said. ``Dubai is still good value when you're paying in pounds, (or) you're paying in euros.'' Nakheel, the developer, and Kerzner, the hotel operator, are both privately held companies and do not release sales data. Leibman said demand from tour groups looks strong well into the first part of next year.
Yet Marios Maratheftis, head of regional research for the Middle East, North Africa and Pakistan at Standard Chartered Bank in Dubai, said there is "good reason" to be concerned that global financial problems could hit Dubai's tourism industry. Nevertheless, he said, the city's long-term outlook remains positive.
Kerzner has grown increasingly close to Dubai in recent years. In 2006, the company took itself private in a $3.8 billion deal partially bankrolled by a division of Nakheel's state-owned parent, Dubai World. Nakheel retains a large stake in the company.
Nakheel's hotel division has expanded rapidly. The company's holdings include New York's Mandarin Oriental, the Fontainebleau in Miami, and the W Hotel in Washington. Its parent also owns a minority stake in MGM Mirage Inc. and is teaming with that casino operator and Kerzner to build a multibillion-dollar casino on the Las Vegas Strip.