DUBAI: does the mirage have legs… or feet of clay?

October 22, 2014
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It seems not a single person who has visited Dubai has returned without a litany of superlatives singing its praise. Apparently, it is the Paris of Les Années Folles, the Manhattan of 1935, the California of the sixties. Everything there is bigger, better, shinier. The number of guest rooms is increasing substantially every year as construction never seems to slow down. In the so-called “Five-Star” category, thousands of rooms are added annually to the existing inventory of 30,000 (one third of a total inventory of 85,000 rooms).

By 2020, the year it will be hosting World Expo (the theme: “Connecting minds, Creating the Future”), Dubai wants to have 160,000 hotel rooms (twice the current number) in order to cater to 20 million tourists annually. Build it and they will come? What if they do not?

Orlando has Mickey Mouse, and Las Vegas has gaming. For religious reasons, Dubai will never have gaming. As for Mickey Mouse, those of us who have been around for a few decades remember that it has not always been smooth sailing for the town Goofy built. And Orlando is within driving distance of 12 to 15 million people, and a cheap (off season) airfare from 200 million more. And in Orlando, while you may want to pay top dollar at the Four Seasons, you can also crash in a time share unit for the entire family for $89 a night. In Dubai, the poor traveling salesman, used to his Two-Star Ibis or Holiday Inn Express, may be hard-pressed to find an accommodation fitting his needs and means. He will, eventually, but not in the glamorous part of the Emirate: Dubai has, after all, limited coastal access. Once you find yourself a few blocks inland, the glitter is lacking.

What does Dubai have to offer to its tourists? There is indoor skiing, which is of limited interest if you are from Europe. There is shopping: great for the Saudis and the folks from India. Less so for Europeans and Americans who have the same merchandise available at home, albeit at higher prices, but will have to pay high custom duties on the way home. The desert? Sure, you will never go hungry, because of all-the-sand-which-is-there. Amusement parks: Dubai is betting big on that, and developing some spectacular projects. It has been proven, however, that only Americans and Asians love amusements parks. Ask the folks at Disneyland Paris: even though it has its own TGV train station, it just barely avoided bankruptcy for the second time. And a family of four is not going to fly Emirates nor stay at the Burj Al Arab, just because there is a direct fight that takes only 5 hours: it is just too expensive a proposition.

Who spends the money in Dubai? First it is its citizenry, which amounts to less than 15% of the population. Then it is approximately 600,000 Saudi visitors a year – often in search of good liquor, great shopping and prostitution. Visitors from India are the second largest group, mostly to shop for gold. Europeans do love it for tourism (Dubai is a five-hour flight from Frankfurt, Geneva, Rome, Athens and a few other cities). Americans, also for tourism, but mostly for business. Last but not least, the “expats” including over 100,000 Brits still cherishing the idea of “colonial” living.

The vast majority of Dubai’s population is made of indentured, ill-treated and ill-paid migrant workers. They come from the Philippines, India, Sri Lanka, Afghanistan, China. In Dubai, strikes are illegal, and 99% of the private-sector workforce are immediately deportable non-citizens. Since these migrants are known for sending most of their hard-earned money ($100 to $150 per month) back to their families, they do not make much of a dent in Dubai’s economy, other than to feed and clothe themselves. They live away from the glitz, crowded six to ten to a room, often without functioning toilets. Dubai’s police may turn a blind eye to illicit diamond and gold imports, even prostitution rings, but they are diligent in deporting Pakistani workers who complain about being cheated out of their wages by unscrupulous contractors, or jailing Filipino maids for ‘adultery’ when they report being raped by their employer.

Tourism is a dangerously high 20% of GNP in a location that offers little: unbearingly hot weather for part of the year, little in terms of cultural and historic monuments, limited freedom, extremely high prices, not such a convenient location: from North America it takes twice as long as Europe. Asians, other than Indians, find no cultural affinity for Middle Eastern countries. Oil and gas, expected to run out completely before 2020, represents a mere 5% of the GNP. Construction, real estate and financial services (Money is treated very well in Dubai, a lot better now than it is in Switzerland) are the largest sector of the economy after shipping. Shipping revenues have been artificially boosted by both Iraq wars: peace in the Middle East would cost Dubai dearly in lost revenue.

So, what will it be?

Will the mirage prove to have legs…or feet of clay?

 

Full disclosure: The author has never set foot in Dubai and merely expresses facts gathered from various sources.

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