Hedging their bets: Continued growth in the business segment runs parallel to investments in sports, leisure and culture

In recent years Qatar has seen a renewed focus on tourism. “In the past, a prosperous tourism sector was not a top priority. Most resources were being devoted to other areas like energy, health and education,” Hassan Abdulrahman Al Ibrahim, strategy development director at the Qatar Tourism Authority (QTA), told OBG. “Now that’s changed. As these other areas have matured, tourism has become more of a strategic priority.” Progress in the sector has been gaining momentum in recent years, driven by a combination of state investment and private business activities.

By The Numbers

Sector indicators show steady growth in visitor numbers. Arrivals from the GCC grew from 952,856 in 2012 to nearly 1.1m in 2013, or 14.4%, according to the QTA. Saudi Arabia continued to account for the largest number of visitors, with over 670,000 nationals arriving in Qatar in 2013. Visitor numbers from Kuwait, however, grew at the fastest rate, 32.5%, followed by Saudi Arabia (17.3%) and Bahrain (10.5%). Arrivals from the rest of the world grew as well, increasing 9.1% from 217,514 to 237,328 between 2012 and 2013. However, by far the largest contributing region in 2013 was Asia (152,475), followed by Europe (35,861) and non-GCC Arab countries (34,093).

In late February 2014 Qatar announced its new Qatar National Tourism Sector Strategy 2030, which aims to reach 7.4m visitors by 2030, or just over 600,00 a month. Issa bin Mohammed Al Mohannadi, the chairman of the QTA, unveiled the plan at Katara Cultural Village and said the overall goal was to make Qatar a major tourist destination with unique culture and heritage offerings. The plan also focuses on attracting more visitors from outside the GCC to reach 64% of all arrivals, up from 18% in 2013, and the government has opened satellite offices in London and Paris, with plans to open eight more. The strategy’s other goals include increasing the sector’s contribution to GDP to 5.1% by 2030, boosting employment from 25,000 in 2012 to 127,000 and expanding the number of hotel rooms available from 13,407 in 2012 to as many as 62,000.

The plan would require investments of $40bn-45bn from both the government and private sector in a range of tourism-related products and programmes, such as upgrading public beaches and developing centralised ticketing services, among other things. The document emphasises balancing the country’s existing facilities to include mid-range hotels and promoting a wider range of activities, most of which will be located outside of Doha and include: cultural attractions; leisure activities, such as shopping and dining; the meetings, incentives, conferences and exhibitions (MICE) market; beaches and water sports; medical tourism, sporting events; educational programmes; and nature tourism.

More visitors can create positive knock-on effects for several sectors, as businesses such as hotels, shopping malls and airlines enjoy a larger customer base. Visitor exports – a metric made up mostly of spending by international tourists – have more than doubled in the past five years, growing from QR11bn ($3bn) to QR23.4bn ($6.4bn) in real 2012 prices, according to the UK-based World Travel & Tourism Council’s (WTTC) Qatar 2013 annual report.

Business First

Business has been the traditional mainstay of Qatar’s tourism sector and continues to be so. In 2012 business tourists accounted for 64.5% of the tourism sector’s contribution to GDP, according to the WTTC. Business also brought in the lion’s share of non-GCC visitors, accounting for nearly 73% of the total. In the first quarter of 2013, that trend continued, with the portion of business travellers growing slightly to 74%. Hydrocarbons wealth in recent years has been funnelling down into economic development projects in nearly every sector. As a result, the state is attracting a wide array of workers from abroad to oversee construction projects, help establish cultural institutions and jumpstart scientific research.

MICE

Qatar’s well-established MICE market is another important factor. The state has several major conference and meeting venues, the centrepiece being the Qatar National Convention Centre (QNCC). The eye-catching complex opened in December 2011 and is run jointly by US-based AEG, a sporting and entertainment company, and Qatar Foundation (QF) – a state-funded human development organisation under the leadership of Sheikha Moza bint Nasser. Designed by Japanese architect Arata Isozaki, the venue is shaped like a Sidra tree, a desert plant native to Qatar, and has 40,000 sq metres of exhibition space. It was the first structure in the country to receive the US Green Building Council’s leadership in energy and environmental design (LEED) certification for its unique energy-saving design.

Following its first full year in operation, indicators are strong for the new QNCC. In May 2012 the centre announced that it had exceeded its first-year revenue target, bringing in over QR72m ($19.7m) to Qatar from overseas visitors. By December 2012 that number had risen to QR283.5m ($77.65m). The boost was in part due to the UN’s Framework Convention on Climate Change 2012, which took place from November 26 to December 7 that year. The event, one of the largest conferences in the world, brought 10,000 delegates to QNCC. In November 2013 QNCC hosted the Airport Exchange conference, one of the largest in the global aviation industry, and – in line with its goal to attract more researchers to Qatar – the following month hosted the Excellence in Paediatrics conference.

Convening

The Doha Exhibition Centre, although significantly smaller at 15,000 sq metres, is another important MICE venue in Qatar. The facility is geared more toward exhibitions than conferences, bringing trade shows from around the world. A new 90,000-sq-metre venue, the Doha Exhibition and Conference Centre (DECC), is also nearing completion. Located in the central West Bay district, the DECC, initially set to open in 2012, was delayed due to concerns related to the structure’s overall height. A 550-metre obelisk-shaped skyscraper, designed by German architect Helmut Jahn, will form part of the DECC, but it was feared that the towering structure would alter flight patterns in the city. Obstacles have since been cleared, and in December 2013 local press announced that construction was slated to resume soon. Beyond dedicated conference and exhibition halls, Qatar’s ongoing construction of hotels in the lead-up to the 2022 FIFA World Cup has created a myriad of smaller MICE venues.

Steady investment in MICE infrastructure should serve the country’s tourism sector well, both economically and strategically. MICE provides the bedrock of business tourism in the country. Business spending in Qatar is already nearly double that of leisure, and was expected to grow 7.3% in 2013 to QR23bn ($6.3bn), according to WTTC estimates. While the WTTC predicts the gap between leisure and business spending will narrow by 2023, the business segment will remain tourism’s major breadwinner for the short and medium terms. Such high-profile gatherings are also of strategic importance to Qatar, which is working to build the country’s brand as a destination for global leaders to do business. As the country continues to become more involved in international economic and political affairs, a burgeoning MICE market could be a key asset.

Sports

Although the link is not as apparent as with business or leisure, sports and tourism are a closely linked pair. The government’s efforts to shore up the country’s status as a sports destination received a welcome boost in December 2010 when FIFA selected Qatar to host the 2022 FIFA World Cup. In preparation for the influx of tourists, Qatar will spend as much as $115bn, according to a report from Standard Chartered in early 2013. Costs for one of the world’s largest sporting events include infrastructure, accommodation and new stadia. “We expect near- to medium-term spending trends to focus primarily on delivering core infrastructure,” the report said. “Sport-related infrastructure (i.e. football stadia) is more likely to begin midway through Qatar’s decade-long spending cycle.” Municipal upgrades, including highways, sewerage systems and a new metro system, are already under way, as are larger infrastructure additions, like the New Port Project and Hamad International Airport, the latter of which is nearly finished.

Although Qatar’s selection for the World Cup made a splash in international press, the decision was not so surprising in the country, where a crescendo orchestrated by major stakeholders gradually built up to Qatar’s selection. In 2006 Qatar clinched the opportunity to host the Asian Games, a sporting event organised every four years by the Olympic Council of Asia. The two-week event included nearly 10,000 athletes from all 45 member nations of the Olympic Council of Asia. In 2011 Doha hosted the Pan-Arab games, a multi-sport athletic tournament for the member states of the Arab League. In the 2011 iteration, 21 countries from the Middle East and North Africa sent athletes to compete in 31 events throughout December that year.

In The Game

As for football credentials, stakeholders in the country have been working to make up for lost time. In 2010 Sheikh Abdullah bin Nasser bin Abdullah Al Thani bought the Spanish team Málaga for €36m. In 2011 QF announced a €170m sponsorship deal with FC Barcelona, according to Reuters, making it the largest sponsorship deal of any football club. In December 2012 QTA submitted for approval a four-year public relations deal worth €700m with Paris Saint-Germain, a team that has been owned by Qatar Sports Investments, a private shareholding firm, since 2011.

Thanks to past events and continuing sports investments, Qatar has already built a baseline of stadia and athletic venues. The Khalifa International Stadium opened in 1976 and was renovated in 2005, doubling its capacity from 20,000 to 40,000, in preparation for the Asian Games. The Aspire Dome, the world’s largest indoor sports facility of its kind, also received its first opportunity to host a major international sporting event with the arrival of the Asian Games. The Aspire Dome is part of the larger Aspire Zone complex, which sits a short drive to the west of central Doha. The venue is run by the Aspire Zone Foundation, established by emiri decree in January 2008, and aims to raise athletic ability in Qatar, promote healthier lifestyles and increase Qatar’s share in the global sports economy.

The foundation has three core businesses: Aspire Academy, Aspetar and Aspire Logistics. Aspire Academy, established in 2004, is a sports institute that recruits students from both Qatar and abroad. Students there receive an academic curriculum combined with athletic training. Aspetar, which opened its doors in 2007, is the Gulf region’s first advanced sports medicine hospital to receive recognition as a FIFA Medical Centre of Excellence. The organisation’s mission is to serve the country’s growing body of athletes and sporting visitors and put Qatar on the map as a destination for sports medicine. Aspire Logistics, meanwhile, manages the venues and facilities of Aspire, as well as the logistics for international sports events and other gatherings. The idea is to gain expertise hosting major events in Qatar and, eventually, be able to export those skills and knowledge to other countries.

Leisure

With warm weather during Europe’s winters, Qatar also has the potential build itself into a leisure destination for visitors escaping colder weather at home. Tourism stakeholders are hoping to expand the leisure segment, which has been eclipsed by business tourism in the past. Of the 61,491 visitors who arrived in Qatar in the first quarter of 2013, about 25%, or 15,897, entered on tourist visas. The ratio for business travellers is likely higher, however, since some business visitors on short-term stays enter on tourist visas.

QTA aims to raise the number of leisure tourists in the coming years, encouraging growth in cruise, golf, shopping and outdoor tourism. The leisure segment could receive a welcome boost with more cruise passengers coming to Doha. Currently, liners call on Doha Port, which is currently heavily crowded with commercial traffic. The New Port Project, located 30 km south of Doha, is to relieve the Doha Port and allow for its renovation, which will include a new cruise terminal.

Cruise Segment

Middle Eastern cruise tourism is still in its infancy, but growth has been rapid, Lakhsmi Durai, Royal Caribbean International’s executive director for the Middle East, told English-language daily The National in June 2013. Dubai’s success as a departure port for cruises could be a rising tide for other Gulf countries, offering long-haul visitors a chance to visit several different GCC states in one trip. Tourism operators see this potential, which could provide business for local operators and cultural attractions like the Museum of Islamic Art and Souq Waqif. “We expect more cruise ships would bring great opportunities,” Dharshan Ayinikkal, the general manager of Qatar International Tours, told OBG. “They are already passing through the region, and Qatar could easily become a more important stop.”

Golf & Shopping

Golf is also a promising growth area for the sector. Doha currently has two golf courses at the Doha Golf Club: a 9-hole academy course and an 18-hole championship course. The Doha Golf Club hosts the annual Qatar Masters tournament, which has been a regular on the PGA European Tour schedule since 1998. In addition, Msheireb Properties has plans to develop a new 18-hole course near Education City.

Shopping is another area set for expansion. Qatar offers plenty of retail options for incoming visitors, including shopping malls, outdoors avenues and the more traditional Souq Waqif. Investment in these areas is steady. According to figures from the global real estate services company DTZ, as of the third quarter of 2013 there were nine new shopping malls under construction that will add a total of around 1m sq metres of gross leasable area by 2016 (see Retail chapter).

Outdoors

To make Qatar stand out, however, authorities are focusing even more on outdoor tourism, with an emphasis on catering to family-friendly activities. The outdoor and adventure segments have plenty of ground to cover – over 25% of the country is designated as nature preserves. In Al Reem, in north-western Qatar, visitors can see the Arabian Oryx, while the Umm Tais islets and sandbars host turtle nesting areas. Tourism authorities are working to invest in visitor infrastructure in these areas to make them more accessible. In Umm Tais, for example, plans are afoot to rebuild historical structures, in addition to a visitor centre, ranger station and research facilities. Sand dunes and beaches at Khor Al Adaid, an inland sea on the border with Saudi Arabia, have also created business for local tour companies. These operators run day-excursions and overnight camping packages that group “dune-bashing” expeditions in the desert with trips to the beach.

Into The Past

Indeed, tourism authorities are working to capitalise not only on Qatar’s natural landscapes but also its heritage. Qatar Museums Authority (QMA) is spearheading state efforts to re-invigorate archaeological work in the country. Under the leadership of chairperson Sheikha Al Mayassa bint Hamad bin Khalifa Al Thani, QMA has since its establishment in 2005 managed the country’s museums and overseen the preservation and development of cultural and heritage sites. Its restoration department has, in conjunction with the Ministry of Endowments and Islamic Affairs, worked to restore mosques at Abu Manartain, Sumaisma and Al Owaina. The organisation has also completed restoration work at Al Wakra Castle, Al Wajba Castle, and the house of Abdulla bin Thani. As for the future, QMA has its sights set on two more mosques, four full villages and the Old Fish Souq in Al Khor.

In June 2013 UNESCO announced that the Al Zubarah archaeological site was added to the UNESCO World Heritage list, the first site in Qatar to gain such recognition. The coastal town, located 100 km north-west of Doha, was founded in the mid-18th century. It grew into a pearling and fishing centre but was abandoned in the mid-20th century. A Qatari-French excavation team was still working in Al Khor at the end of 2013. Investing in archaeological sites outside of Doha serves a double purpose. In addition to buoying the cultural and outdoor tourism segments as a whole, these investments also go toward supporting the knowledge economy the authorities aim to build over the long term.

QMA is also working to build up the state as a regional and international hub for the fine arts. Qatar’s approach differs somewhat from neighbouring countries, and although QMA believes in the benefits of tapping global experts to cultivate an art scene, the organisation has opted to create their own brands, rather than by forming partnerships with global names.

Although a major undertaking, initial progress is promising. The Museum of Islamic Art (MIA), the best known symbol of Qatar’s cultural aspirations, rises out of Doha Bay, sitting on its own manmade island. Designed by Chinese-American architect I M Pei, the iconic building houses one of the largest collections in the region, with works spanning 14 centuries across three continents. Various arms of the state and the royal family have also been active on the international art market to build Qatar’s art stockpile. In February 2012, Greek shipping magnate George Embiricos sold a highly prized post-impressionist painting, Cézanne’s “The Card Players”, for over $250m to the Qatari royal family. The sale of the oil painting, the last in a series of five that was still in private hands, marks the highest sum paid for a work of art to date. The royal family’s high-profile acquisition is one in a series of several, which include works by American painter Mark Rothko ($72m) and British artist Damien Hurst ($20m).

Culture & Identity

Work is also under way on Qatar’s national museum. Opened in 1975, the museum was built in the restored palace of the late Sheikh Abdullah bin Jassim Al Thani. An ongoing museum renovation is to surround the palace with a modern addition designed by French architect Jean Nouvel. Construction on the new building, whose shape is inspired by the desert rose, is set to be completed in December 2014. The museum will showcase the state’s vision of Qatar’s national identity, an aim that has underpinned cultivation of the country’s cultural sector. “Most people think of Qatar as an oil-rich country,” Dina Bangdel, director of art history at Virginia Commonwealth University in Qatar, told CNN news in May 2013. “Both museums [and] galleries are really saying the opposite. They’re saying, ‘you know, we have a rich heritage.’”

While QMA is stocking the country’s museums with famous collections from around the world, Katara Cultural Village is working to build up cultural institutions within Qatar. Sitting on a beach between West Bay and the Pearl in northern Doha, construction crews have been putting the finishing touches on the cultural village’s collection of beige and white buildings. The project’s broader goal is to cultivate a more global arts scene in Doha. It had its soft opening in October 2010 to coincide with the second iteration of the annual Doha Tribeca Film Festival. Unlike other art venues, many of which gather art from a single era or culture, Katara Cultural Village is expressly intended to create a space where art from around the world can mix with Qatar’s own Gulf-influenced traditions. Likewise, the area does not limit itself in terms of media. Its facilities include traditional galleries, a cinema, a dramatic theatre, an opera house and an open-air amphitheatre. Katara Cultural Village hosts several recently established cultural institutions, including the Qatar Fine Arts Society, Qatar Photographic Society, Doha Film Institute and the Qatar Philharmonic Orchestra. Over time, authorities aim to build up the creative space for Qataris through education, grants and mentoring.

“Qatar is the leading developer for the niche museum segment regionally,” Thilo Rehren, director of the University College London (UCL) campus in Qatar, told OBG. “There are an estimated 50 museums opening in the region, which will require a massive labour market and qualified staff. Qatar is filling this gap through collaboration between QMA and UCL.”

Hospitality

Cultural, leisure and business tourism have helped support the growing hotel industry. The hospitality sector in the GCC has seen gains in recent years, thanks to tourism investments and MICE expansion. “The GCC hospitality sector is poised for a healthy growth owing to factors like favourable economic conditions combined with infrastructure development, increased bids to host high-profile global events and government support to the private sector,” Sameena Ahmad, the managing director of Dubai-based investment bank Alpen Capital, said following the company’s publication of a GCC hospitality report in October 2012. “All these factors have contributed to the steady increase in tourist arrivals which in turn has facilitated the growth of the hospitality industry in the region.”

In Qatar, these factors are widely visible. The government’s emphasis on tourism development has helped boost investment in related infrastructure. The 2022 FIFA World Cup adds to this boost, since FIFA estimates Qatar will need 50,000-60,000 rooms for the 500,000 visitors expected for the event. “Hotel room demand [in Qatar] is expected to rise strongly as corporates from across the world explore various business possibilities,” the report said. “This is likely to boost occupancy rates from 59% in 2011 to 66.8% in 2016. Strong corporate demand for hotels is likely to help average daily rates rise at a capital annual growth rate of 1.6% from $231 in 2011 to $249.7 in 2016.” Both local and global hotel brands are ramping up investment, setting a brisk tempo for construction in Qatar (see analysis).

Building Up

While hotel investments converge on Qatar, local hotels are also beginning to reach out to the global hospitality arena. In April 2013 Doha-based hotel brand Retaj, which has six locations in Qatar and runs in accordance with sharia law, opened its first overseas location in Istanbul. “Hospitality is a solid investment in Qatar now, especially because of the business and convention infrastructure, but we are also trying to expand our brand abroad,” Retaj’s CEO, Maajid Saarany, told OBG. Istanbul’s 187-room Retaj Royale is only the first of what the brand expects will be several hotels in Turkey. The firm’s total Turkish investments are set to reach $500m by the end of the decade-long expansion, according to Turkey’s state-owned Anatolia News Agency. The group also has a location in Comoros north-west of Madagascar.

Qatar’s real estate developers are also investing in hospitality projects abroad. Qatar Holding, part of the Qatar Investment Authority, announced in the first quarter of 2013 a global expansion of its Harrod’s hotel brand in London, Sardinia, Kuala Lumpur and New York. Katara Hospitality, the tourism investment arm of Qatar Holding, is also looking to expand its international footprint. The firm has more than 6000 hotel rooms operating or under development in 11 markets around the world, ranging from Europe and the Middle East to Africa and South-east Asia, including properties such as the Raffles Hotel in Singapore. According to CEO Hamad Abdulla Al Mulla, the plan is to own 30 properties by 2016 and 60 by 2030.

Outlook

While MICE development continues to progress with the construction of the DECC, investments in other areas like cultural, sport and outdoor tourism are expanding the sector into leisure segments as well. Qatar has significant funds to invest, and the government has showed its commitment to developing major transport and tourism infrastructure projects. Nevertheless, there are hurdles ahead for those operating in the sector. In recent years hotel operators have been able to hold occupancy rates at around 60%. While that is at the lower end of the acceptable occupancy rates for hoteliers globally, it is actually impressive given the continual opening of new hotels each year in Qatar. Following the 2022 FIFA World Cup, however, some worry that a supply glut will force prices below sustainable levels. To address these issues, the authorities are entertaining options of temporary housing, like cruise ships, or even utilising hotels in Bahrain once a planned causeway to the neighbour is complete. At the same time, growing visitor numbers help assuage these fears, as investments in the coming decade will continue to boost tourism growth. The idea is to use 2022 not as an endpoint, but as a springboard for further growth.