Sometime ago, I described Dubai as a city of dreamscapes and nightmares. Flying on Emirates and landing in the still-busy city of Dubai speaks volumes about how much time, effort, and expense the emirate has spent in forging its destiny. In principle, Dubai's efforts to wean themselves off oil and gas exports makes sense. In the near future when its reserves run out, there will be a need to have other principal industries. To date, its leadership has bet large on travel and tourism as well as finance and commercial real-estate. In other words, these are precisely the areas hardest-hit by the ongoing credit crisis. Hence, it seems the reinvention of post-energy Dubai may need some reappraisal.A few days ago, the Times of London had a long, sneering feature on the fate of Dubai. You can read the condescending parts at your leisure. Here, I will just mention the more pertinent discussion of the fallout from the credit crisis:
The credit crunch hit Dubai badly, and it is clinging to its despised but less feckless neighbour, Abu Dhabi, for a very large bail-out. Troubled state-backed firms owe British companies more than £400m. The plush apartment complexes down at the marina are half-empty, investment has collapsed and property prices with it — house prices are down by as much as 50% and are predicted to fall by another 20%. It is almost impossible to put a precise figure on the rate of the collapse, because, according to one estate agent, there is no market. Nobody is buying, nobody is renting; there is no new business. An estimated £335 billion of projects have been halted or are on hold. And it is predicted that the population [a majority of which are expats] could decline by 17.1% by the end of the year, so things will not be getting better too quickly.It seems that another project in the emirate has come undone: sponsorship money in the much-vaunted $20M Race to Dubai that was supposed to become the flagship event of the European Professional Golfer Association (PGA). When the lure for the event is money plain and simple, its luster dims significantly when there is, er, no more money. From the Chicken Noodle Network:
The European Tour looks set to suffer a major body blow this week when it announces a reduction in prize money for this year's flagship $20 million Race to Dubai and Dubai World Championships. A golf insider from the region has told CNN that the impact of the credit crunch on Leisurecorp, the company behind the concept, and the fact the Dubai World Championship has not attracted the handful of marquee sponsors hoped for, has led to a decision to reduce the payout for one of golf's most lucrative competitions.The bigger they spend, the harder they fall nowadays. The perfectly manicured greens in a desert environment does speak volumes about the artificiality of the entire project. Was the Dubai of endless skyscrapers--each taller and more fanciful than the one before--just a pipe dream? It may be another cautionary tale over lending to an entity with no credit rating to speak of despite endless suggestions that it would gain one. Were megaprojects and wads of cash thrown at sporting events really the ingredients for a successful post-energy future? I don't have the answers but think they're going back to the drawing board at Dubai mission control.
The running of Leisurecorp's day-to-day business now falls under the control of Dubai real estate developer Nakheel. Since the start of the year Leisurecorp has made many staff redundant, put its flagship development "The Jumeirah Golf Estates" on hold and its CEO David Spencer, the brains behind the "Race To Dubai" concept, has left the company...
With the reduction in prize money and persistent rumors among players that the Race Dubai will only be staged for one year instead of the original five, as promised when it was announced, the commitment of the players may be tested.
The move will come as a major embarrassment to the European Tour who had rebranded itself around the sponsorship and described the launch of the Race to Dubai as the most significant development in its history. The concept was supposed to help it keep pace with the PGA in the U.S. which outstripped its European rival's prize fund by many millions of dollars, especially with the $10 million FedEx Cup.
Dubai banked on the Race to Dubai to put it on the global map as a golf destination and was seen as the perfect marketing tool. But Dubai's financial struggles have affected many golf business such as the Tiger Woods course where construction has been put on hold and is now believed to be up for sale.
