Published: February 4, 2009 at 2:17 PMActually Dubai has very little oil; Abu Dhabi has most of it in the UAE. Dubai has been hit hard like everyone else by the credit and real estate bubbles. Universal's park has been pushed back to early 2012 at the earliest. City of Arabia is being built with the Restless Planet dinosaur park to open in 2010. How good will it be? We'll just have to see. Six Flags will probably get dumped soon since they've made a deal with Qatar. Legoland still has a good chance for 2011 considering the Dubai government owns 20% of Merlin. The Formula-1 theme park has already had a good deal of work done on it, though it's been pushed back to 2010 for opening.
Published: February 4, 2009 at 2:45 PMSo no Ferrari Park with the annual F1 race? Oh well, sounded like a lot of whip lash anyway! Well, at least they'll still have the only Tiger Woods golf course design in the world (not that it is somewhere where any normal, non-oil baron would play golf...)
Published: February 4, 2009 at 4:01 PMAs has already been mentioned I don't think the falling price of oil has hit Dubai, only 6% of the Emirates GDP is based on oil.
The main thing that's hit Dubai has been the lack of demand for real estate due to the global economic climate. As a former resident of Dubai, and someone who visits twice a year I notice each and every time I go back just how many new high-rise towers appear, these were all started during the boom period, now the economy has slowed down the demand has fallen and Dubai has been hit hard.
I'm pretty sure that Universal will certainly go ahead, along with the Marvel and Dreamworks parks, although all these projects will likely be delayed. Legoland should also go ahead due to the Dubai governments stake in Merlin.
Six Flags is a strange one, although I do expect it to go ahead. The F1 park will certainly go ahead and a lot of the park has already been built, along with a number of Dubailand attractions.
I should be going to Dubai again pretty soon so I'll get some photo's of Dubailand and the planning office plus a write up if you think it will be of interest Robert.
Published: February 4, 2009 at 5:14 PMI chose my words carefully: "oil-enriched." If Dubai's wealth was not coming from the sale of oil, it certainly was coming from providing financial services to those whose wealth, in large part, derived from the sale of oil. It might be secondary oil wealth, but it is undoubtedly oil wealth.
Second, what is happening in the world's financial markets now is not some unfortunate random downtown that just happened to scuttle grand plans in Dubai. The world's financial melt-down was the inevitable, and easily foreseen, result of the financial bubble that created these plans.
Let's examine the Dubai market, using Las Vegas as comparison. Both were large tourist developments created in isolated desert communities. But Dubai faces obstacles that Vegas did not. First, there is no Los Angeles within driving distance to provide a core local market. Second, migration within the immediate community is severely restricted, and generally not open to families or desirable for outsiders seeking long-term relocation.
So there are just two options to populate the Dubai market: the small market model, which would be limited to highly wealthy individuals, primarily those in the Middle East whose fortunes derive from the sale of oil. The large market model is middle-class to wealthy Europeans and South Asians, whose ability to fly to Dubai depends upon cheap transportation (i.e. cheap oil) and favorable credit and exchange rates.
We will not again in our lifetimes see credit as easily available as we have seen in the past 10 years. And if long-haul transportation costs remain low enough to make Dubai a viable destination for Europeans and Asians, capitalization for Dubai's projects will become a problem, given the lower oil revenues (and corresponding oil-driven investments) and the tighter restrictions on credit.
If oil prices rise, the Europeans and Asians are priced out of the market, so Dubai would be building its projects and money-losing playthings for the local wealthy. (Put the Ferrari project in this camp.)
Simply put, the numbers don't work for the 2007 vision of Dubai (as they don't work for the 2007 vision of just about everything in the world). Whatever is to be completed in Dubai -- and remain open for a decade or more beyond -- will have to be developed within one of the two models that I've described.
Published: February 4, 2009 at 8:15 PMThe Ferrari theme park in Abu Dhabi is more than half done so it looks like that one will be completed.
Published: February 5, 2009 at 11:14 AMI expect Dubai to diversify in the face of the current economic climate. Up to now Dubai has been very much orientated towards providing services for the wealthy, no more is this noticeable than when looking at Dubai hotels, you'll not find too many hotels less than a four star. If Dubai expects to keep the visitors coming in there is going to have to be something geared towards the budget traveller, i.e. cheaper hotels.
As you said Robert, the financial crisis that kicked this global economic problem into gear was foreseeable but go to Dubai and mention the phrase ‘economic crisis’ or ‘credit crunch’ and you’ll find most people play it down, especially those at the top. There is certainly a head in the sand attitude in Dubai, which they are now paying for, thousands of luxury villas and apartments are left vacant, not to mention the hundreds of towers which were designed for office space.
There is a local market though, many residents of other Arab nations flock to Dubai regularly as their own countries don’t have anything similar to what Dubai can offer. Even residents of other Emirates go to Dubai to get away from the strict drinking laws imposed on them in places like Sharjah.
This was always going to happen to Dubai, at one point the bubble was going to burst. A key economic principle is that a boom period cannot be sustained, no more is that more obvious than in Dubai.