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November 6, 2008

GULF STATE:Will the Middle East boom be hit by the world economic crisis?

Jacqueline Khale assesses whether the current booming meetings and events industry in the Middle East can be maintained during the global slowdown.

Addressing a recent ICCA seminar, Rob Davidson, senior lecturer in business travel and tourism, University of Westminster, said, “If America sneezes, Europe catches a cold”. But the affliction seems far more serious and widespread and the ripples of the financial meltdown are being felt all over the world.


So how has the economic crisis affected the meetings industry in general and the Middle East in particular?


The crunch will bite
According to Patrick Pondo, director of MICE, Kuoni Travel LLC Destination Management, the global financial crisis is going to affect the Middle East as the key markets such as UK and Germany will invest less money into meetings and incentive programmes in this region. “Another market that everyone had high expectations of was the US – but that is facing its worst crisis and no one can see an immediate solution to this. If the situation does not last too long, 2010 may give us better results, but we are not bidding on the US markets,” he adds.


“At Desert Adventures and Kuoni Destination Management, we are trying to focus on the Russian market, Central Europe, Poland, Czech Republic etc. The size of business may not be very great, but when put together, it is substantial. Asia is another market where we expect big business as is Latin America, but it is still not a mature market for the UAE,” continues Pondo.


“Traditional markets such as Europe have definitely been hit by the recession. The effect may not be felt by us in the last quarter of 2008 but definitely in 2009. Coupled with recession, we also have high inflation in Dubai, so we have a double impact. We need to address this as a region rather than as individual businesses until 2010 when there will be an availability of more rooms. With Germany and UK as source markets, the business will be definitely affected while American incentives are definitely going to stay within the country,” said Jyoti Panchmatia, general manager, SNTTA.


Other markets
Gillian Taylor, business tourism manager, Abu Dhabi Tourism Authority, is of the opinion that we need to look at other markets and especially at the region. “In Abu Dhabi in 2007, 33% of hotel guests arrived from the UAE, seven percent from the GCC and 11% from other Arab countries– so half of our hotel inventory is being taken up from the region. We need to educate the world on the incentive difference here - and the ideal forum is GIBTM where we need more of a regional presence,” she says.


“We have a big job to do in many ways – one is to make our destination less daunting for those who are economically challenged at the moment and secondly in looking at how business from within the region can be encouraged,” she adds.


Reflecting the views of the hospitality sector, Guy Epsom, regional director sales and marketing, Hilton International, comments: “So far so good, we haven’t yet felt the tremors of the crisis in the Middle East. In fact the Middle East and in particular the UAE is one of the few markets that can weather this storm. Furthermore, considering the continuing level of investments and the stupendous projects being launched, there is a genuine feeling of future prosperity. For the moment business continues full steam ahead, and so will the MICE industry in the region.”


Epsom is also confident that strong governmental backing, especially in the UAE, will bring in international investors. “All the investments will be championed by long-term government strategies in the spirit of development and diversification, and will continue to attract foreign business to the region. In fact emerging markets such as the Middle East are poised to benefit as multinationals shift investment and operation focus to the region, and in doing so grow the regional meetings industry,” he says.


Room for optimism
And according to Didier Scaillet, vice president of global development MPI, there is still reason for optimism. “The economic crisis is certainly not affecting us the way it has post 9/11 (which was only seven years ago) and I think there are different reasons for that. Firstly you can hardly open any marketing publication today and not see a reference to event marketing. All the research that we have done at MPI, we have found that there has been a massive shift within organisations from traditional print advertising to web advertising and event marketing. This means that corporations who saw this as overheads now see it as an investment – so it will not be the first thing they will slash from their marketing budgets,” he says.


As times get tougher corporations will realise that they need to get closer to their customers – which means meeting them. “So our industry is more mature from that standpoint and less exposed to these elements,” Scaillet remarks.


“Secondly, globalisation also plays an important role. From the Fortune100 companies in the US, at least 35% of their revenue is coming from the overseas offices. So in spite of an economic slowdown in Europe and the US, the organisations are becoming increasingly global and will not be so much affected by it," Scaillet continues


“Also the current financial crisis should not be confused with the real economy in the US, which is in fact quite strong and registering a good growth. Financial services are among the top three spenders (with IT and healthcare) in our industry, so undoubtedly, there will be some repercussions. There won’t be any more Lehman Brothers’ meetings except maybe in court!


“What we are seeing through our barometer at MPI is it does not look like there will be any big change in meeting numbers. I do anticipate a slowdown, but I don’t anticipate a collapse. The acid test will be in October/November when people plan their new year’s budgets and that’s when we will know for sure,” says Scaillet.


Scouting new source markets, looking towards the region, keeping rates at realistic levels, stretching the shrinking budget, adding value by injecting creativity – these may just be some of the measures that the meetings industry in the Middle East will need to adopt till the global situation normalises.


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