This blog entry is the first of six on the state of public relations and marketing in emerging markets. It will be my goal to give an objective, unbiased view of an emerging market’s past and present marketing schemes, as well as to comment on these schemes and to pinpoint the best areas for growth. This entry will focus on the Middle East, with a specific emphasis on the United Arab Emirates (UAE) of Dubai and Abu Dhabi.
The UAE has positioned itself at the forefront of economic progress and innovation in the Middle East due to its “progressive” federal government, open economies, and massive oil and natural gas reserves. Although Dubai’s economy is described as “open,” most of its domestic companies are owned by one of three government-held investment conglomerates: Dubai World (DW), Investment Corporation of Dubai, and Dubai Holding.
The oil boom of 2003-08 brought in massive multi-billion dollar returns for all the UAE states, which consequently allowed for direct investment in sectors such as construction, manufacturing, medicine, alternative energies, and international finance. Despite these massive five-year gains, Dubai overspent on construction, having built such spectacles as the Burj Khalifa (the tallest building in the world), artificial islands in the Persian Gulf, and the Pink Atlantis Hotel. On account of these and other financial missteps, the state of Dubai is set to repay $18 billion of principal in 2011. This debt follows both the rescheduling of payment in 2010, as well as the default-preventing $10 billion bailout loan from Abu Dhabi at the end of 2009, which resulted in the renaming of the Burj Dubai to Burj Khalifa in honor of Abu Dhabi’s ruler, Sheikh Khalifa. Unfortunately for Dubai, its business leaders may need to shed some of their property assets in order to climb out of debt.
Regardless of the debt challenges, Dubai’s economy does seem to be recovering; tourism is steadily increasing and trade with China and India is growing. Even still, an $18-billion hole is a hard one to climb out of for any state.
Over the course of the past decade, Dubai has positioned itself as a premier holiday and living destination for the world’s super-rich expatriates, especially those from the West. In this respect, PR firms have very well positioned Dubai as the nouveau chic destination. So well, in fact, that Dubai is viewed as the most exciting and dynamic city in the Middle East, while its Emirati neighbor Abu Dhabi is seen as dull and boring (though their more austere style has allowed for budget surpluses).
Take, for example, Burj Khalifa (built by Emaar Properties), which sold out all of its available vacancies within 24 hours of their offering. Specifically, the Armani residences sold at a rate of $3,500 per square foot, while general office space sold at $4,000 per square foot, the highest property rates in Dubai to date. It has come to pass, however, that a little over a year later, the Burj Khalifa is largely unoccupied, due to both foreclosures and unreasonably high rent. In fact, rents in the Dubai International Finance Centre (DIFC) were recently cut in half in order to attract renters. Clearly, Emaar needs to rethink Burj Khalifa’s units’ initial rental prices, as well as perhaps offering renters long-term incentives (e.g., 10% lower yearly rent with a 3-year contract).
Tourism and Health Care at a Compelling Price
It seems necessary, then, due to its unreasonably high debt, for Dubai to focus on how it can best recover in the short-term. The most obvious answer can be found in the high-class tourism for which the city has made itself known. Dubai has indeed taken steps to boost its image into the stratosphere, especially through Emaar’s tourism website, www.mydowntowndubai.com. Here, one can watch videos of an attractive 20-something, Western-looking Arabic woman shopping, eating lunch at the pool, and going out with “friends” to some super-trendy nightclubs and bars. Although the website does not list Emaar’s web design firm, they do credit famous Swedish fashion photographer Mikael Jansson as the print advertisement photographer.
Future campaigns will be critical in order to entice Westerners to make the trip to the other side of the world—a feat made feasible and reasonable through Emirates [Airline], another UAE government-owned company. Successful business-to-business marketing interaction between Dubai-held corporations, such as Emaar and Emirates, will be necessary to help the country pay down its debt.
Dubai also plans to market itself as a medical tourist destination, having secured contracts with the Cleveland Clinic, among other health-care providers. If successful, the medical industry in Dubai will prove critical both for the health of the people of the UAE, who happen to have the second-highest national rate of diabetes in the world, and for the Dubai economy, which will benefit from expanded medical tourism. (You might wonder why the UAE has the second highest rate of diabetes in the world – the first being Nauru, a tiny island nation in the South Pacific. While most of the native peoples of the UAE do not drink due to their Islamic religious beliefs, they have a notorious sweet tooth and, as a population, assiduously avoid exercise.)
Accounting firm Deloitte predicts that 1.6 million Americans will go abroad for medical care in 2012, up from 750,000 in 2007. This is a staggering increase, one that Dubai should take good note of. Successfully marketing to the American medical tourist would bring the possibility of a substantial amount of capital into Dubai. Especially helpful would be a joint venture between Emirates, Emaar, and Cleveland Clinic Dubai to offer discounted airfares and hotel rates. This would clearly depend on the Cleveland Clinic being able to convince Dubai of the viability of American medical travel over the next decade. Furthermore, it might be hard to lure potential patients from the U.S. when they have the best medical care (if they can afford it) right in their own back yard at hospitals such as the Cleveland Clinic, Johns Hopkins, and Mt. Sinai. In spite of this fact, the lower cost of medical treatment in Dubai coupled with the lure of travel to an exotic locale could position Dubai as a popular medical destination. Moreover, the uncertainty of the implementation of Obamacare should make selling medical tourism to the American consumer a top priority for Dubai.
An Investment in Communication and Advertising to Eliminate Xenophobia
In terms of pleasure travel, Dubai needs to be proactive and market themselves as the de facto destination for wealthy Western tourists. To do this, they certainly need to amp up their advertising scheme in the United States. Although advertisements to visit Dubai abound in Europe—especially with “Fly Emirates” emblazoned on Barclay’s Premier League jerseys—there is quite the dearth of them in the U.S.
If Dubai wants to expand its tourism base, they must expand their marketing operations in America. Such an attempt would involve high expenditures and a certain amount of risk, especially in assuring the xenophobic American tourist that he/she would be safe in the Middle East. However, with the current state of its finances, Dubai needs to increase its advertising presence in the American market in order to turn its pleasure tourism economy into high gear.
Abu Dhabi the Austere Neighbor
Abu Dhabi, unlike Dubai, has taken a different approach to spending its oil revenues. Even though Abu Dhabi did spend heavily on city construction, it did not overspend to the point of potential bankruptcy. In fact, Abu Dhabi has maintained budget surpluses, even during the worldwide economic downturn of 2007-10. Abu Dhabi, as the capital and administrative center of the UAE, is much more sedate than Dubai, having little to no nightlife. Instead, Abu Dhabi has focused its investments on infrastructure, education, the arts, and renewable energy projects.
Most notable is Masdar, the Abu Dhabi Future Energy Company, which was formed to develop and establish Masdar City. Masdar City is a planned city being built in Abu Dhabi that will depend entirely on solar and other renewable energy sources with a sustainable, zero-energy, zero-waste ecology. This bold, exciting experiment will cost—by its completion around 2020-2025, with Phase I to be completed by 2015—around $19.8 billion, a number that is less than the $20 billion price tag attached to the Downtown Dubai project and with far greater, long-reaching dividends. To help with the development of Masdar City, in addition to provide graduate/research programs to highly skilled international applicants, Masdar created the Masdar Institute (see http://masdar.ac.ae/).
Electric Vehicles in Abu Dhabi More Possible Than Some People Think
The Masdar Institute, which runs as a parallel research institute with the Massachusetts Institute of Technology (MIT), has four major research domains: sustainable energy production and storage; efficient energy delivery and use; clean water, environment, and climate; and integrated sustainable development. Researching intelligent devices for smart power grids is one of the ongoing projects under the “Efficient energy delivery and use” research domain at the Institute. Successful research into smart grids and delivery of energy is essential to getting the feasibility of electric vehicles (EVs) across to American consumers.
It would prove wise for investors to invest in the Masdar Institute’s research into smart grids. Moreover, contributions of EV charging stations to Masdar City may allow for the world’s first zero-emission city. Such investments and contributions would not only assist research, but also potentially prove the practicality of EVs to the rest of the world. If a country that sits on top of one of the largest oil deposits in the world can adopt EVs, then so can the West.
Many things can be learned from the example of Dubai and Abu Dhabi, both positive and negative. If the U.S. is wise we will follow the example of Abu Dhabi in making sustainable energy and smart grids critical private-sector investment areas. It should be noted, however, that the monarchial structure of the Emirati governments makes their “private” investments a lot easier to direct, something unheard of in the democracies of the Western world. Even still, the forward-thinking energy policies of the UAE should shine as a beacon for the rest of the world, especially the United States, to follow.
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Barrett Principe, a recent graduate of Boston College, is an intern with WATT. Apart from being the office lackey he applies for law schools throughout the nation.