OBG talks to Iyad Malas, CEO, Majid Al Futtaim Holding

Interview: Iyad Malas

Why has the sector been able to perform so well during a period of fiscal and political turmoil?

IYAD MALAS: To understand the success of Dubai’s retail sector one must examine it from the context of Dubai’s positioning within the region and globally.

As a result of a number of positive decisions by the government, the emirate was able to establish itself as a first-rate international trading centre by developing the most advanced infrastructure in the region. Building on that, the expansion of Emirates airlines has been a key component in terms of physically bringing people to Dubai.

Now, with a wide range of five-star hotels, beaches and first-rate dining options – not to mention the malls themselves, which have become an attraction – there is a very large product offering.

Additionally, the ease with which citizens from a wide variety of countries can obtain visas has facilitated Dubai’s ability to attract a greater number of visitors. Therefore, it has become a destination of choice for not only those within the region, but for those who live further abroad as well.

All of these factors have resulted in the tourism industry experiencing steady growth at 10% per annum and reaching 9.5m visitors in 2011, which is strong for a city so small in size. Dubai is the eighth-most-visited city in the world. Its success is based on a diverse product offering, in addition to its global reputation and proximity to a range of markets. It is this diversity that has allowed the tourism and retail sectors to achieve such good results.

How can the retail sector alleviate its dependency on tourism and rely more on local residents?

MALAS: When the financial crisis of 2008 hit there was a short-term impact, but that was offset by population growth, which is steadily increasing. If Dubai can sustain this population growth and create a strong domestic market base, the retail sector’s dependency on visitors from abroad will diminish.

Another alternative to alleviate this risk is to continue widening the range of products that are offered so that people from varied socio-economic backgrounds can afford to experience Dubai.

The high-end, luxury segment is well represented, but the next phase in Dubai’s tourism development is the growth of mid-market visitors.

As income levels in many emerging markets improve, Dubai has a good opportunity to attract tourists from those countries. Fly Dubai and other low-cost carriers are expanding their connectivity with key growth markets; more options for two- and three-star hotels are becoming available, discount packages are now more abundant; and malls are repositioning themselves to focus on the mid-market and ensure that those customers can find the price point and products they are looking for.

Does Dubai’s retail sector have room for further growth in both the short and long term?

MALAS: Dubai is on a par with London in terms of gross leasable area, which demonstrates its maturity given its population and tourism potential.

Any further growth will have to be in line with these two elements. While there is still demand for additional capacity at Dubai Mall or the Mall of Emirates, these are unique cases. The reality is that there are a number of malls that are suffering from fewer shoppers than expected. Like most industries, the mall business is not organic and new shopping concepts have to be developed.

Nothing is limited in terms of capacity in the short term. If there is a surge in tourism or more people move to Dubai than expected, there may be some additional retail capacity developed in specific areas.

It is possible that we will see the arrival of some new concept malls, outlet malls or neighbourhood stores. With regards to high-end luxury establishments, what already exists is pretty well covered. Even mid-market malls are well accounted for.