During the first half of 2008, Pure Gold Group established Pure Gold Properties, targeting a Dh1 billion-strong portfolio of properties in Dubai. Initial plans were for the real estate arm to have a collection of property developments such as Meydan City, the Lagoons and the Dubai Waterfront. But the plan did not get executed as the global financial crisis hit the region and only a small amount of investment, relative to the target, was made.

Firoz Merchant Founder and Chairman, Pure Gold Group. (MUSTAFA KASMI)

“The global scenario has changed, so I didn’t invest in those,” Firoz Merchant, Founder and Chairman of Pure Gold Group, said. He added the company would continue its conservative model – no wholesale, no hedging, no speculation and no diversification. “I am a pure trader. I don’t believe in hedging or in speculation.”

In February 2008, you said your target was to open 100 stores by 2010. Are you nearing that target?

We have 75 outlets in the Gulf Co-operation Council (GCC) states and India. We plan to open 25 stores in India this year, of which, we have already signed 10 stores [and] five of these will open in the next two months. For the other 15, we are searching for good locations. We have expansion plans in Qatar and Saudi Arabia. We also plan to open three to four stores in the UAE. We’ll try to reach 100 by the end of 2010.

You plan to have $1 billion (Dh3.67bn) in sales?

Yes. I plan to open 200 stores in India in the next five years involving an investment of $200 million with a revenue target of $1bn.

From where will you source the $200m?

We have a very good relationship with banks. It will be finalised very soon. I’m looking at syndicated banks.

When do you plan to withdraw the first tranche?

In the next three months.

How much?

It depends. I am opening the five stores with my own money. For the next five, I will talk to the bank. My expansion plan will not stop even if I don’t get money from financial institutions as I have good support from my diamond and gold suppliers.

You saw a minimal four per cent revenue drop from Dh550m in 2008 to Dh528m in 2009. Where did you earn most of the revenue?

About 80 per cent of the sales come from the UAE. We are well established in the UAE, Kuwait and Oman, while in Bahrain we still need some time. We plan to increase the revenue by 20 to 30 per cent this year. In 2008, we achieved the target in September. Unfortunately, the economic crisis came [then]. In 2009, we came into the market with a different module, a different business plan.

We started to work [out] from October [2008] how to survive in 2009 as the recession began. We came up with products with value for money and with price range products – a quarter and a half-carat diamond ring, a solitaire for the price of Dh999. Also, we negotiated with our suppliers and started to buy in bulk. Because we were getting a good deal, we passed it on to customers.

You earlier said Pure Gold would expand into the Asian and Chinese markets with Singapore as the regional hub. Did that happen?

I changed my mind. Now I want to settle in my native India. I want to see the reaction of the Indian market. India and China are very strong in terms of economy and population. Once I settle in India, certainly I will think about China. Trend is your friend, so go with the trend; you cannot fight the trend. You cannot fight change [so] you must change yourself. Things totally changed globally, so it is better [to] believe in reality. In the Middle East, there are plenty of opportunities, [in] Lebanon, Syria, Egypt and Turkey.

You have diversified into real estate.

Out of the profits, I injected 25 to 30 per cent into the property business. All businessmen want to have a portfolio or a basket of investments. But I did not diversify from the core business.

In 2008, Pure Gold announced that it planned to diversify into new properties, including Pure Gold Properties, a collection of developments such as Meydan City, the Lagoons, and the Dubai Waterfront. Have you continued with that plan?

The global scenario has changed, so I didn’t invest in those. I have a very limited and manageable property portfolio. I have one Dh136m plot in Meydan City, another plot in Mirdiff and a small apartment, which I financed with my own funds. [Now] I will look at opportunities but will not move from my core business.

You have manufacturing facilities in India and China. Are you looking at opening a new one here, considering the UAE is your largest market?

China is a joint collaboration. In India I have my own factory in Mumbai. It is feasible to have one here, but for the time being, it is not required. But if I get a good place to set up a manufacturing unit here, I will do so.

Diamonds are your main business but the company’s name is Pure Gold. Why?

When I started the business, I called it Pure Gold because at that time gold was very valuable. Then consumers began to buy diamonds due to the high cost of gold.

Do you hedge?

I don’t believe in hedging or in speculation. I am a pure trader. We buy first and then sell.

PROFILE: Firoz Merchant Founder and Chairman, Pure Gold Group

India-born Merchant comes from a family with interests in real estate. Moving to Dubai in 1989, he set up his own jewellery retailing business, Pure Gold Jewellers. In just two decades, the company has grown to have more than 75 outlets in the UAE, Kuwait, Oman and Bahrain in the GCC and in India, employing more than 500 staff. It also owns two jewellery manufacturing units in India and China. A philanthropist, he has actively supported the Indian community in the UAE and in India and works with the Red Crescent Society and the Sheikh Mohammed Bin Rashid Al Maktoum Charitable Trust.

Nakheel promotionvideo of Dubai Waterfront, Palm Islands, The World and The Arabian Canal.

Source:  www.youtube.com

Dubai Waterfront areal video by Nakheel, 2007

Source:  www.youtube.com

The Dubai government’s decision to pay the equivalent of $1.7 billion to redeem in full the sukuk instruments issued by crisis-hit property developer Nakheel was a painful one. But people familiar with the decision-making said the alternative would have been much worse, a possible showdown with hedge funds and distressed debt investors that could leave Nakheel with unfinished property projects and knocking confidence in the wider economy.

In addition, the emirate was concerned that failing to pay the sukuks, structured instruments that behave like bonds but which conform to the rules in Koran that prohibit the payment of interest, would hit the fledgling market for Islamic finance.

Nakheel is the property arm of Dubai World, Dubai’s flagship conglomerate, famed both for its palm-shaped development off the emirate’s coast and its towering debts which helped put its parent company in deep trouble. At the height of Nakheel’s woes last December Nakheel’s 3.6 billion United Arab Emirates dirham (about $980 million) 2010 and $750 million 2011 sukuks were trading at around 38% of face value. Repayment in full means hedge funds and distressed debt investors who bought then have made a mint.

The repayment, and hedge-fund profits, is only possible because Dubai will pump $8 billion into Nakheel and convert to equity some $1.2 billion in debt owed to the government. However, the people familiar with the plan said the emirate’s hand was forced because Nakheel urgently needs to repay trade creditors to finish projects it has underway.

Under the restructuring plan the trade creditors will be repaid and work continue. But before this can happen, Nakheel’s restructuring proposal must be approved by all creditor classes, including the sukuk holders.

One of the people familiar with the matter said an extensive cost-benefit analysis was done on whether the sukuks should be restructured instead of being paid in full. Proposals considered during the painstaking negotiations that have ensued since Nakheel’s parent company Dubai World shocked international markets last November by asking for a debt standstill, have included creditors taking haircuts of up to 40%.

According to estimates from UBS AG analysts, half Nakheel’s $22 billion of liabilities are related to trade creditors.

However, the person said it was decided the sukuks should be paid in full and on time because the economic cost to do otherwise would be too high as it would leave the restructuring process open to being blocked by a single class of creditors. The risk: distressed debt investors could hold enough of one class of credit to effectively veto the complete deal. It is a pattern common in other restructurings: distressed debt investors will negotiate hard for the most favorable deal for them, as they have far less to lose than the original debt investors, having bought when the debt had already tumbled in value. These aggressive tactics can stall restructurings for many months.

A spokeswoman for the Dubai government said a significant part of the rationale behind repaying the sukuks was to get the “Nakheel engine running again”. “We looked at the cost of restructuring against paying them as they fell due and the conclusion was it would make more economic sense to pay them as they fell due,” she said.

One person familiar with the matter said those involved with the negotiations were also mindful that they did not want to damage the sukuk market. Investor confidence in the sukuk market, which in 2009 was worth $31 billion globally according to Bank of America Merrill Lynch, has been shaken following defaults in the past year from Investment Dar of Kuwait and Saudi Arabia’s Saad Group.

“The decision to pay-down Nakheel’s sukuk should be perceived pretty positively by the sukuk market overall,” said Okan Akin, a credit strategist at Royal Bank of Scotland in London. The person familiar with the matter said protecting of the sukuk market was also of particular importance because Nakheel’s restructuring plan includes paying 60% of the amount owed to trade creditors via the issuance of new sukuks.

Under the plan, Nakheel and the Dubai government will negotiate with banks to provide a liquid market for the new sukuk, by acting as market-makers. This will allow trade creditors to cash-in the sukuks if they wish. If confidence in the sukuk market is hit, trade creditors could find their new sukuks worth less than expected, and the ultimate goal of getting Nakheel back on its feet would be defeated.

—Clare Connaghan in London contributed to this article.

Write to Ainsley Thomson at ainsley.thomson@dowjones.com

In 2003, Robert Miller dreamed of escaping the cold winters of the UK and set about looking for a second home in Dubai.

After coming to the emirate on several holidays, it did not take the company director long to settle for a flat in Palm Springs, a 25-storey beachfront property proposed by Damac Properties at Palm Jebel Ali.

The home was going to be a winter retreat for the father of three and his family and possibly, further down the line, a retirement home.

Seven years later, instead of soaking up the sea views from his balcony, Mr Miller is still awaiting the day Nakheel, the Dubai World-owned master developer of Palm Jebel Ali, releases the land for Damac to build on.

“I still have that dream, but who knows if it’s ever going to be fulfilled,” he says.
Mr Miller was among hundreds of investors who, in early 2008, protested when Damac said Palm Springs would be shelved, blaming changes in plot sizes by Nakheel.

Against mounting pressure, Damac later reversed its decision, saying it had been offered a new plot of land.

But by the end of 2008 investors were dealt another blow when the onset of the financial crisis in Dubai forced Nakheel to suspend infrastructure work on the reclaimed island. Like thousands of other investors across projects that have been affected by the developer’s debt problems, Mr Miller has little choice but to wait.

“Damac offered us the right to transfer our investment to another project, but the offers are more expensive so it’s a non-starter,” he says. “As long as the island is built, Damac has an obligation to build … but the island might not be operational for another three years and then Damac will need two more years.”

But with US$9.2 billion (Dh33.79bn) of fresh funds being pumped into Nakheel by the Dubai Government, there is a glimmer of hope that projects such as Palm Jebel Ali will eventually see the light of day.

Last week, Nakheel started negotiations with contractors, many of whom have waited more than a year to be paid, across all of its projects in an effort to revive stalled projects.

Under the Dubai World restructuring plan, each of the developer’s trade creditors would receive a cash payment of up to Dh500,000 soon after an agreement was reached, with the remainder settled later.

Riad Kamal, the chairman of Arabtec Construction, which stopped work on the Al Furjan villa community in January because of unpaid bills, hopes to resume work soon.
“Creditors should consider the offer very carefully, and I see no reason why they should not accept it and move on,” Mr Kamal says.

A shake-up of Nakheel’s board last week, resulting in Sultan bin Sulayem being replaced by Ali Rashid Ahmad Lootah as the chairman, is also aimed at bringing the company’s property developments to completion.

Nakheel plans to expedite delivery of projects that were partly constructed, although it is still unclear which ones will take priority.

Last May, the developer said it had about $31.5bn worth of properties under construction in Dubai, including 2,200 villas at Jumeirah Village and 900 at Jumeirah Park, which had been due for completion by the end of the year.

A further 2,000 homes at the Al Furjan development are expected to be delivered by the end of this year. Arabtec was appointed in June 2008 to build 1,500 homes, and had completed 550 before it stopped work in January.

“Currently, all project schedules are being reviewed as part of the current restructuring process,” Nakheel said. “This process needs sufficient time to ensure that the interests of all stakeholders are taken into consideration.”

Ian Albert, a regional director at the property consultancy Colliers International, says the developer will probably weigh up the risks of each project before deciding which ones to complete first.

“They’re probably going to look at projects that are in the mid-to-late stages of completion in terms of the actual properties themselves,” Mr Albert says.

“Following that, they’ll probably look at those that are the least exposed in terms of market oversupply and therefore carry less risk … so they might ask: ‘How many properties at a certain project have already been sold off-plan?’

“So if they sold 90 per cent and had only just come out of the ground, then they’d probably complete that development. If, however, only 10 per cent was sold and it’s in highly contentious market conditions for that particular property type, such as offices for example, then they’d probably freeze that development.”

Nakheel still has commitments to complete infrastructure on some of its larger projects, such as The World islands, Palm Deira, and the Waterfront, so plots of land can be handed over to sub-developers.

The same is true for Palm Jebel Ali where, apart from 1,300 villas that will be built by Nakheel, sub-developers have bought plots.

“Nakheel could, theoretically, progress on these developments and provide infrastructure, but if the developers can’t build because they can’t obtain financing and there’s no demand for their product, then why should Nakheel push to complete at this point in time?” Mr Albert asks.

“The problem with Waterfront, for example, is that it’s a major project but because of the nature of the sales to sub-developers there is a shared risk element.”

It also remains to be seen if plans for The Universe, another collection of reclaimed islands, and the Nakheel Harbour and Tower development, which was expected to include a skyscraper taller than the Burj Khalifa – the tallest tower in the world – will ever get off the ground.

agiuffrida@thenational.ae

Efors, the licensed consultancy within the UAE University, is seeing a rise in projects using FRP (fibre reinforced polymer) as an alternative solution compared to the traditional steel reinforcement bars on many new major projects in the UAE.

FRP composite material rebars have been used at the Palm Cove Canal in Dubai Waterfront. (EB FILE)

Dr Asharaf Biddah, Associate Professor at Structural Engineering from the Civil and Environmental Engineering Department at the UAE University said: “We are working on a project in Jebel Ali where there are some defects and we will offer our advice after evaluation. We are also working on some running projects on Reem Island where there are some minor construction mistakes. On some projects, there are changes after a decision from the owner.

“The UAE University has a research centre and Efors is a licensed consultancy within this centre.”

FRP can be applied on top or bottom of slab and can also be used on beams or columns, due to its flexibility, he said. “We can use it in instances where there is either damage to structural parts due to ageing, fire, corrosion or where we need to reduce stresses in steel. Or we need to eliminate a wall or a column or make an opening in the slab. Or there is an error in construction or in planning and insufficient dimensions,” said Biddah.

So far, he has worked on 30 projects in Abu Dhabi, 30 in Dubai and 20 each in Fujairah, Ras Al Khaimah, Sharjah and Ajman and 10 in Al Ain over the past eight years.

“The coming years are for repair and strengthening rather than new construction. The recent years saw construction of fast track projects that will show defects in the next few years due to minor details being finished without paying attention to quality,” he warned. “In 2010, we are working on more than eight running projects.” Pricing is the only factor that works against the product.

“FRP composite material is an alternative solution for reinforcing concrete structures as opposed to the traditional steel reinforcing bars,” said Tamer El Maaddawy, Assistant Professor from the same department at the UAE University.

“Such rebars have been used in marine docks and waterfront structures such as Nakheel’s Palm Cove Canal in Dubai Waterfront.

“It is ideally good for buildings having magnetic resonance imaging (MRI) units such as hospitals or buildings having equipments sensitive to electromagnetic fields where the use of steel reinforcing bars is not advised.

“For instance, FRP rebars have been used in the construction of the Baker Hughes Building in Dubai. This building’s function is to calibrate electrically sensitive equipments. These rebars have also been used in tunneling to create soft eyes [openings in existing concrete walls].

“This has been implemented in Metro Dubai. If such walls are reinforced with steel rebars, it will be very tough to create such soft eyes. FRP rebars is used in these circumstances to facilitate and speed up the work,” said Maaddawy.

According to him, demolishing and reconstruction is not an economical solution nowadays given the current economic conditions.

“Strengthening and repairing of existing structures is gaining popularity all over the world. The solution is to use composite materials in strengthening and repair instead of concrete or steel jacketing, which are labour intensive. Concrete and steel jacketing systems are also often vulnerable to the same deterioration mechanism. Composite materials could be used for strengthening existing concrete columns, beams, and slabs without any extra space,” he added.

The UAE University is offering studies to the construction industry as well as consultancy services. “We are currently conducting a research work to examine the performance of concrete structures repaired with advanced composites under the corrosive environment of the UAE. This project is funded by the Emirates Foundation. There is also a collaboration with several international companies including Pultron, Sheock, and Sika,” said Maaddawy.

It is anyone’s guess that last year has gone into the books as one of the worst for the hotel industry with revenue per available room (RevPAR) – an industry benchmark – practically collapsing as travellers stayed away.

The Ajman Kempinski hotel. Analysts say hotels in the Middle East are implementing innovative schemes to keep the ball rolling in a tough economic climate. (YOUNES AL AMER))

In a market such as the Middle East, while most cost reduction strategies have already implemented, now is the time to focus on maintaining revenues, said an industry expert.

Despite slow signs of recovery across the region, Dubai and Abu Dhabi markets will experience further declines in RevPAR in 2010, according to Paul Arnold, Principal and Head of Transaction Real Estate Advisory Services Group – Middle East and Africa, Ernst & Young – a global consultancy.

“Those markets which were able to maintain their rate integrity in 2009 and have limited supply entering the market in 2010 will be the fastest to recover and achieve positive RevPAR growth in 2010. These markets are expected to include Beirut, Jeddah, Amman and Makkah,” he told Emirates Business.

For hoteliers across the region, cost containment initiatives coupled with maintaining rate while still offering value for money will be the key focus in 2010, according to E&Y analysis.

Meanwhile, 2009 was an extremely challenging year for the Middle East, which registered an average decline in RevPAR of about 15-20 per cent compared with 2008, according to E&Y research.

The E&Y Hotel Benchmark Survey for January-December 2009 reveals that individual markets within the region were impacted differently with some exceptions. Beirut, for example, achieved an increase in RevPAR of more than 90 per cent, while Jeddah witnessed growth in RevPAR of about seven per cent driven by strong increases in corporate demand coupled with limited supply.

Dubai, on the other hand, achieved the most significant decline in performance across the region, marked by about 33 per cent reduction in RevPAR last year over 2008. RevPAR in Dubai hotels dropped from $256 (Dh940) in 2008 to $170 in 2009. Average room rates also witnessed the largest decline in the region of 25 per cent – from $310 in 2008 to $232 last year.

The belt-tightening

Corporate belt-tightening, leisure travellers seeking discounted packages and booking at the last minute, as well as new supply additions resulted in significant downward pressure on occupancy and average room rates in Dubai during 2009, according to Arnold.

“2010 will be equally challenging as more supply enters the market, and further declines in RevPAR are expected,” he warns.

A greater focus on offering additional value-added services within the room rate (instead of simply dropping rates) is one way to weather the storm, said Arnold, citing examples including complimentary airport transfers, breakfast, internet, etc. “In addition, hoteliers should also explore alternative source markets, such as China, given that demand from Dubai’s traditional source markets has dried up,” he said.

Further warning of challenges in 2010 for Dubai hoteliers, Arnold said: “For those hotel owners whose capital structure does not match the financial and operational needs of the business, now is the time for them to review and possibly renegotiate covenants as well as develop an appropriate financial platform that meets cash requirements.

“And for those owners of existing hotels who may not have liquidity challenges, now is also a good time to renovate and reposition their products. This will prove invaluable towards strengthening their competitive posture once new supply enters the market and demand begins to recover.”

Furthermore, the composition of hotel room inventory is changing in Dubai, as it begins to witness more regionally and internationally branded economy and midscale products entering the market, according to Arnold. “Therefore, Dubai [on a city-wide average basis] is not likely to witness a return to peak average room rate levels that were achieved in early 2008 in the short to medium term [if we exclude the effect of inflation], due to the much needed branded economy and midscale supply additions entering the market.”

He added that a further rate correction in the upscale and luxury segments as a result of a significant influx of new upscale and luxury room supply will also reduce rates to more reasonable levels for this market.

Abu Dhabi hotels on the other hand saw average room rates being the highest in the region at $306 in 2009. “While Abu Dhabi is also anticipated to witness a correction in average room rate in the short to medium term due to supply pressures, its current inventory and future pipeline are more concentrated in the upscale and luxury segments,” said Arnold, adding: “With more supply entering the market in 2010, hoteliers in Abu Dhabi will strive to maintain rate integrity, albeit at the expense of occupancies. It is expected that the Abu Dhabi market will witness a decline in occupancy of about five to 10 per cent in 2010.”

Dubai’s proposed supply pipeline, meanwhile, remains a key concern as it is anticipated to substantially increase by 26 per cent in 2010 and further increase by 19 per cent in 2011, said E&Y’s 2010 outlook report.

After taking into account the hotel projects which have been announced as cancelled or put on hold, it is anticipated that Dubai will still have an “additional 37,500 rooms by 2013″, the report said.

In Dubai, there may be potential opportunities for investors to acquire under-construction or operating assets at attractive rates in 2010.

For hoteliers across the region, cost containment initiatives coupled with maintaining (and in some cases rebuilding) rate, while still offering value for money, will be the key focus this year, as per the E&Y outlook for 2010. It further states that overall Saudi Arabia, Libya and Iraq still offer significant development opportunities due to strong underlying fundamentals in each country and limited product.

Opportunistic funds [that have a direct investment in real estate] which have allocated a percentage of their total investments to emerging markets, are predicted to invest in three- and five-star hotel properties in the GCC.

Amine Hamdani, Vice-President, Fund Advisory and Indirect Investment, CBRE Hotels, told Emirates Business earlier: “These hotel properties present very good investment opportunities as the average room rates (ARRs) and the cash flows are still good… There is more demand from foreign and GCC buyers to acquire hotels in Dubai and the GCC.

“They are looking for investment opportunities here and there are some aggressive buyers. There are high net worth individuals, institutions as well as opportunistic funds, both European and Asian that have allocated a percentage of their total investment to emerging markets,” he said.

Ahmed Ramdan, CEO, Roya International, a consultancy and services firm in the hospitality sector, said: “Investors who were not even considering deals in the region until some time back are now exploring,”

Macro transactions

Globally, the hospitality industry is also predicted to regain some lost ground, with RevPAR decline expected to slow its downward spiral by four per cent according to a Smith Travel Research (STR) forecast for 2010, which recorded a 16.7 per cent drop in RevPAR last year.

Occupancy levels and the average daily tate (ADR) are also expected to rally this year, with STR forecasting a 0.6 per cent decrease in the former, compared to 2009’s 8.7 per cent drop.

Meanwhile, the ADR decline is forecasted at 3.4 per cent, compared to last year’s 8.8 per cent.

However, even as global demand witnesses this upward momentum, new challenges will continue to face the hospitality industry according to the E&Y report, at the forefront being a renewed appetite for acquisitions, but a deluge of distressed assets.

Similar to past cycles, analysts predict investors are keen to take advantage of the distressed assets that come on the market through acquisitions at discounted prices. Sources theorise that hotel acquisitions may become more prominent in the next few years since investors and owners may find existing hotels to be “safer” investments compared with new developments.

Yet Q4 2009 saw global hotel sales totalling about $2.2 billion, a 44 per cent decline from the same period last year. In 2009, global average saw $12bn in hotel assets being traded, with Europe leading the trend with 316 deals, valued at $5,9bn, followed by North America with 90 deals and $2.1bn worth of transactions and Asia, with $1.9bn worth of transactions and 35 deals.

However, analysts predict this trend will see a change with emerging markets such as Asia and the Middle East leading this turnaround.

Although the current transaction market is still at a low, and the gap between buyer and seller pricing expectations still prevalent, market consensus is that the pace and volume of hotel acquisitions are expected to pick up in 2010. According to Jones Lang LaSalle Hotels’ Hotel Investment Outlook 2010, global hotel transaction volume is expected to jump 20 per cent to 40 per cent in 2010. The anticipated volume increase would be the first seen in two years.

Capital crunch

The economic recession and a dysfunctional credit market, including the absence of commercial mortgage-backed securities (CMBS) debt, have had a profound impact on the hospitality industry in the form of postponed, stalled or cancelled projects, a slowdown in hotel transactions and an increase in loan defaults.

This capital crunch saw hotel corporations raising core capital by devaluing property or launching an IPO. Last year saw hospitality juggernauts such as Hyatt Hotels make headline with its IPO that raised $950 million in November 2009. The group even caught the interest of the Abu Dhabi Investment Authority (Adia) which acquired a 10.9 per cent stake in Class A shares of Pritzker family’s corporation, headquartered in Chicago.

The E&Y report predicts this trend is likely to continue in 2010 given the advantages associated with operating a publicly traded company in the current environment. Real estate IPOs are also expected to continue until commercial real estate values recover.

Arnaud Andrieu, Vice President Investment and Advisory at CB Richard Ellis Middle East, told Emirates Business earlier: “In 2010, operators will face attractive distressed opportunities and would be able, for the one with enough liquidity on their balance sheet such as Hyatt post its IPO, to capitalise again in real estate on a long-term basis. “Therefore, this is the right moment to take long-term positions in lodging stocks to anticipate market capitalisation growths as this sector has good reasons to rise further.”

New marketing mantra

Hotel corporations are finding creative ways every day to enhance revenues and cut costs in a struggling market and position themselves for future growth.

Leading initiatives adopted by the global hospitality industry include grass roots marketing and social networking, and group and business travel flexibility to reach new customers and reinforce their brand.

In the UAE, leading the wave are brands such as IHG, with the InterConDFC handle on Twitter offering regular updates on deals, meals and competitions.

One industry analyst said: “The next few years will continue to be challenging for the hospitality industry as a whole, so if you’re not bang on the buck with your restructuring, rebranding, expanding and liquidity agenda for the next few years, your economic recovery will be poor at best.”

DUBAI – Many of Dubai’s most ambitious mega-projects will likely never see the light of day despite billions of dollars the government plans to pump into struggling state-owned developer Nakheel, analysts told Maktoob News.

The Dubai government announced last month it would inject $8 billion into Nakheel to enable it to finish projects and pay contractors, part of a proposal to restructure $23.5 billion worth of debt linked to its parent Dubai World.

Analysts said the money will not be enough for Nakheel to revive stalled work on its mega-projects, including a 1 km high tower and palm-shaped island larger than Manhattan, with a recovery in the local real estate market looking remote.

“No developer at this moment is likely to launch anything significant and new because the demand and supply situation is not conducive for that,” said Matthew Green, head of research at CB Richard Ellis in Dubai.

Nakheel was hit hard by the financial crisis and subsequent collapse of Dubai’s real estate market, which saw property prices more than halve in value.

The crash forced the developer to put many of its projects on hold as financing and buyers dried up. Of its flagship projects only the Palm Jumeirah was ever completed.

Iconic buildings such as the Trump International Hotel and Tower and Nakheel Harbour and Tower were never built, while man-made island projects like the World, Dubai Waterfront and two more palm-shaped islands remain unfinished.

Green said the government’s cash injection will be used for “projects that have seen major levels of construction and infrastructure development like the Palm Jumeirah and Jumeirah Heights”.

Nakheel has yet to say which projects it will use the fresh funding to complete, only that projects have been prioritised on “construction progress, cost of completion, customer collections and market supply and demand”.

“We will have determined which projects are likely to remain longer-term towards the end of the recapitalisation process,” Nakheel said in a statement.

Saud Masud, head of research at UBS in Dubai, said the government cash injection will buy the company some time, but will not solve its long-term difficulties of a lack of end-user demand and project financing.

Currently one in four residential units is empty in Dubai, according to analyst estimates, and some 50,000 units are planned for delivery this year.

Meanwhile, banks are still reluctant to lend as their balance sheets remain stretched because of non-performing loans.

“Property down cycles may last five years or more and we are only one and a half years into the UAE down cycle,” said Masud, who forecasts property prices could fall a further 30 percent this year.

“If market conditions remain depressed, it will clearly put pressure on Nakheel to generate enough free cash flow to repay its obligations.”