Moving up the ranks: Adding new infrastructure and building awareness to ensure continued growth

Though one of the less well known emirates in the UAE, Ras Al Khaimah is quickly developing as a tourism destination. Indeed, tourism has been back on a healthy path since 2010, and industry leaders expect further growth in the coming years. The local economy overall is benefitting from the uptick in visitors as new hotels are being built. Operators in the transport sector are taking cooperative measures, such as charter flights and complimentary airport bus services, to facilitate the ease of travel to and from RAK.

The largest group of tourists in RAK come from the other emirates – many of them visit for business or come on the weekends to escape busier cities such as Dubai or Abu Dhabi. Germans, followed by visitors from other EU countries, make up the next-largest segment of tourists. A growing number of Russian sightseers are also visiting the emirate. RAK attracts a range of tourists, including nature lovers and families.

MARKET ORGANISATION: The RAK Tourism Development Authority (RAK TDA) was established in May 2011 and charged with the responsibility of overseeing the promotion and expansion of tourism infrastructure. With this comes the authority to regulate and license the industry. RAK TDA also carries out research for expected or proposed projects. The new authority has already set some central aims. RAK TDA hopes to raise the total number of annual tourists in RAK to 1.2m by 2013 and increase the total number of hotel and resort rooms to 10,000 by 2016.

The government is backing up these targets by investing $500m in tourism development projects. The RAK Hospitality Group, a company set up by the government in late 2011, is in charge of managing government-owned tourism assets such as hotels. The firm is also responsible for the implementation of tourism development projects, as well as the regulation of RAK’s dining outlets.

BY THE NUMBERS: A total of 835,200 tourists visited in 2011, according to RAK TDA. This represents a significant rise from 2010 when 600,000 travelled to the emirate. RAK TDA forecasts further growth in 2012, predicting a total of 1.2m by year-end.

As of early 2012 there were 15 hotels and resorts with ratings of four or five stars in the emirate. This figure included six city hotels and nine beach and resort hotels. RAK’s city hotels are the Acacia Hotel, the City Hotel, the DoubleTree, the Golden Tulip Khatt Springs Resort and Spa, the Hilton Hotel and the Mangrove Hotel. The emirate’s beach and resort hotels, meanwhile, include the Al Hamra Fort Hotel and Beach Resort, the Banyan Tree Al Wadi Resort, the Banyan Tree Ras Al Khaimah Beach, the Bin Majid Beach Hotel, the Bin Majid Beach Resort, the Al Hamra Palace Beach Resort, the Al Hamra Village Golf and Beach Resort, the Cove Rotana Resort, and the Hilton Resort and Spa. Between these 15 hotels, there are a total of 2947 rooms. City hotels account for a combined 1130 rooms, while beach and resort hotels make up a combined 1817 rooms, according to RAK TDA.

Average occupancy rates for beach and resort hotels reached almost 71% in 2011 – close to a 8.75 percentage point increase from 2010 figures, which topped out at 62.25%. The average daily rate (ADR) for beach and resort hotels also improved in 2011, rising by 9.35% from the previous year. The ADR totalled $132.71 in 2011 and $121.36 in 2010. Revenue per available room stood at $75.55 in 2010, increasing by 24.5% in 2011 to top out at $95.06. Room revenue jumped from $47.1m in 2010 to $61.8m in 2011 – an increase of around 31%. Beach and resort hotels recorded a total of 712,065 guests in 2011.

City hotels also underwent significant growth in 2011. RAK TDA figures show average occupancy rates rose by 3 percentage points from 63.15% in 2010 to 65.07% in 2011. ADR increased from $61.93 in 2010 to $66.26 in 2011 – an almost 7% climb in rates. Up from $39.11 in 2010, revenue per available room rose by 10.24% in 2011 to $43.11. The most dramatic growth for city hotels, however, came from room revenue. Hovering at $8.2m in 2010, room revenue grew by almost 75% in 2011, totalling around $14.4m in 2011. City hotels served 123,135 guests in 2011.

NEW HOTELS & RESORTS: With ever more tourists travelling to RAK, new hotels are being built to meet the rising demand for rooms. For example, the DoubleTree by Hilton, one of RAK’s city hotels, opened its doors in April 2011. The new hotel has increased the number of rooms available in the emirate by 126.

Hilton Worldwide announced plans to boost its presence in the emirate with a second DoubleTree by Hilton when it signed a management contract with Mohamed Ruqait Real Estate in January 2012. Scheduled to open in early 2014, the new hotel will be located on Marjan Island, a group of five manmade islands near the Al Hamra area. Still under development, Marjan Island covers more than 2.7m sq metres and will eventually have floating villas, waterfront properties and several beaches. The DoubleTree by Hilton Resort Marjan Island will enjoy a prime location on the island and expand the number of hotel rooms in RAK by 340. This includes 45 chalets on the hotel’s beach and 11 suites in the main building. The hotel will also add to RAK’s food and beverage industry by adding two restaurants and two bars.

Hilton’s expansion plans also include the new Waldorf Astoria Hotel. Scheduled to open in the first quarter of 2013, the hotel is located in the Al Hamra area and is part of a mixed-use development encompassing a 600-metre private beach, a 3000-person convention centre and a golf course. The Waldorf Astoria shares a building with Al Hamra Palace Beach Resort, managed by Casa Hotels and Resorts, and will add 349 hotel rooms to the emirate. Hilton Worldwide has plans to further increase its imprint on RAK’s tourism sector when it begins managing Al Hamra Fort Hotel and Beach Resort in 2013. The 266-room property is located nearby the Waldorf Astoria Hotel. Before Hilton Worldwide assumes management of the property, the hotel’s developer, Al Hamra Group, will start renovating the facility at the beginning of summer 2012.

Another large hotel is currently under construction on Marjan Island. Ras Al Khaimah Hospitality Group has signed an agreement with Turkish hospitality group Rixos to introduce the 632-room Rixos Bab Al Bahr, the first all-inclusive concept hotel of its size in the UAE, scheduled to open in first quarter of 2013.

Further projects include upgrading the 101-room Banyan Tree Al Wadi, the first desert resort in RAK, located on a nature reserve of more than 100 ha. This will comprise extending the villa complex, building an equestrian club and adding to the selection of wildlife. “SPORTAINMENT”: One unique new project in development is Spanish football club Real Madrid’s “sportainment” theme park and resort, announced in late March 2012, which has attracted a great deal of attention. Featuring rides, extensive sports facilities, retail space, a club museum and a 10,000-seat stadium, the 50-ha resort on Marjan Island will open in January 2015 and is hoped to attract as many as 1m visitors a year.

A number of mountain resorts are also currently being developed. At 900 metres above sea level where the temperature stays as much as 12 degrees cooler than at sea level, the new resorts will offer tourists a more comfortable climate during the emirate’s hot summer months. The development of road infrastructure in more remote locations is ensuring these resorts are increasingly easy to access.

TRANSPORT LINKS: The ease of transport connections often plays a key role in the development of a country’s tourism sector. This is certainly the case in RAK. Tourists can access the emirate by air through Dubai Airport – about a 45-minute drive to the south-west – or visitors can fly directly to RAK. This second option is becoming increasingly common. RAK International Airport (RAKIA) is undergoing a $27m expansion; new runways are being built in addition to extended passenger and cargo terminals. This should facilitate greater numbers of direct flights to the emirate, which should in turn attract more tourists to RAK.

Charter flights are also becoming an important component in RAK’s growing tourism success. RAK Airways currently operates a weekly flight from various locations in Germany as well as Vienna, Austria. This service will continue until June 2012 and is estimated to increase tourist numbers by 50,000 over the season, according to RAK TDA.

Reise Service Deutschland, a German tour company, and DMC World of Travel, a firm based in Dubai, came to an agreement with RAK TDA on the launch of a new charter service in September 2011. The German-Dubai duo is servicing five weekly flights to RAKIA from Germany and one flight per week from Vienna, Austria. The charter flights are expected to bring in an additional 50,000 tourists to RAK during the winter high season. Building on this success, RAK TDA recently signed an agreement with Apollo, a Swedish tour company. Apollo will service a direct flight from Sweden to RAK on a weekly basis throughout the winter tourism season. Each flight will offer 221 seats, and the new service is expected to bring in an additional 5000 visitors between November 2011 and April 2012. All together, this should result in roughly 150,000 room nights for RAK hotels.

Speaking to the Hotelier Middle East in December 2011, chief operating officer of RAK TDA, Victor Louis, highlighted the importance of charter flights to the future growth of the emirate’s tourism sector. “The introduction of charter flights into RAK is proving to be a huge success in reaching our main objective of doubling our visitor number to 1.2m by 2013.”

“In light of the success from our German and Swedish charter services, next year we plan to introduce more charter flights from more countries in Europe. We are also working on setting [up] a dedicated charter operation company specialised in [the] tour operator business under the RAK Airport operation,” he said.

In addition to improved and more convenient air links, the government is taking steps to attract tourists through some of the emirate’s shipping ports by establishing RAK as a cruise stop. The authorities and large cruise tourism operators are discussing the potential of such a plan. Cruise tourism would likely also give a boost to a number of other sectors such as food and beverage and retail. Museums and other cultural and historical attractions would also benefit.

Moreover, RAK TDA is currently working on creating tailor-made travel excursions for cruise tourists stopping by the emirate for one or two nights. Much of the required port infrastructure for servicing cruise ships is already in place, and RAK TDA projects at least 20,000 cruise tourists during the 2012-13 season and is expecting this figure to rise to at least 50,000 to 60,000 cruise tourists in five years.

FOOD & BEVERAGE: Plans are in the pipeline to significantly raise the number of restaurant and dining outlets over the next several years to accommodate growing tourist numbers. Including independent and hotel restaurants, 44 food and beverage outlets currently operate in RAK. The RAK Hospitality Group has plans to increase this number to more than 100 by 2016. Expansion plans include increasing dining variety by offering visitors international cuisine in addition to bakeries, seafood and fast food. So far it has added two new food and beverages brands: Pesto, an Italian restaurant, opened in April 2012 and is planning to set up additional locations across the emirate; Cafe Gourmet is a new cafe chain, opening its first branch in April 2012 in RAK Airport and with further expansion plans scheduled in the emirate by the end of 2012.

The RAK Hospitality Group is focusing on improving food service options at Saqr Park and the emirate’s shopping malls. Additional attention is focused on adding dining outlets along RAK’s Corniche and in Al Hamra Yacht Club and Al Hamra Golf Club. The development of the casual dining market is the primary aim of the RAK Hospitality Group. According to Victor Louis, who in addition to his role at RAK TDA is also the CEO of RAK Hospitality Group, food and beverage infrastructure is lagging behind demand in the emirate. To meet this rising demand, the government has decided to develop a number of outlets now rather than wait for individual investors to enter the market on their own. Both international and local investors are negotiating for dining outlet management contracts.

MEDICAL TOURISM: Significant opportunities exist for RAK in the medical tourism sector. Though additional steps need to be taken, the emirate is headed in the right direction to capitalise on this growing worldwide market. For the most part, medical tourists look for premium health care and premium hospitality at a reasonable price. RAK’s growing hotel industry has four- and five-star hotels at a more competitive price than nearby cities. The emirate’s health care industry is also improving and expanding. There are currently two private hospitals, RAK Hospital and Al Zahrawi Hospital, which have a combined 85 beds and employ a total of 81 doctors. RAK Hospital is also adding additional beds and setting up an eye centre and a diabetic centre to accommodate more patients and improve treatment of specific illnesses.

Besides further expanding RAK’s health care and hospitality sectors, marketing has a key role in developing the emirate as a medical tourism centre. According to one key industry leader, positive word of mouth is the most effective method of marketing medical tourism. And this method cannot be rushed – word-of-mouth marketing takes time. However, if health care and hospitality continue to develop, the flow of medical tourists should carry on growing.

CHALLENGES: Although RAK’s tourism sector is growing steadily, the industry still faces some hurdles. The most significant obstacle to further growth is a lack of tourism infrastructure. To achieve the annual visitor targets set by RAK TDA, the emirate is looking to continue to develop tourism facilities such as shopping malls, dining outlets and entertainment venues.

Work is already under way to upgrade and, in some cases, increase the number of these facilities. As mentioned earlier, the RAK Hospitality Group is working on significantly increasing the number of food and beverage outlets in RAK. Plans are also in the pipeline to improve entertainment options. The Al Hamra Real Estate Development Company is planning to build a cinema complex and an entertainment centre at the Al Hamra Mall, a 37,000-sq-metre, two-storey shopping outlet that opened in 2009.

Though more work needs to be done, RAK’s proximity to Dubai compensates for a lack of some tourism infrastructure within the emirate. Hotels in RAK take advantage of this location by offering free-of-charge shuttles to Dubai at least once a week. As a result, tourists can benefit from the lower hotel costs and atmosphere of RAK, while still enjoying some of the entertainment options other emirates offer.

A second challenge facing RAK’s tourism sector is a lack of awareness of the emirate as a holiday destination. RAK TDA believes that this unfamiliarity is preventing significantly more tourists from vacationing in the emirate. The demographics of RAK tourists – with the largest percentage coming from the UAE – appears to confirm this theory. Although substantial numbers of tourists are travelling to RAK from Germany, there are other large markets in Western and Eastern Europe, as well as Asia, that have yet to be fully tapped.

Promotion plays a key role in attracting visitors from new markets to the emirate and various promotional efforts are already under way (see analysis). RAK TDA is attending international travel shows to raise awareness of the destination, and a public relations agency in Germany as well as one in Russia are promoting RAK’s tourism sector. In addition, RAK TDA is investing in social media marketing activities. As promotional activities begin to increase general awareness of the emirate in new markets, the further development of direct charter flights should facilitate growth.

OUTLOOK: At the northern-most tip of the UAE, RAK is attracting significant numbers of visitors. Evidence of the tourism sector’s increasing success can be seen in the number of hotel construction projects in progress. Hotel statistics for current RAK hotels also showed growth in the occupancy rate, ADR, revenue per available room and room revenue in 2011. RAK’s tourism sector is growing, and should continue to expand over the next several years. “The outlook for the 2012-13 tourism season looks positive,” said Amr Ahmed, the hotel manager at Casa Hotels and Resorts. “It is unlikely that growth will rise much beyond 2011-12 season levels, and economic turmoil in Europe could pose a challenge; however, we anticipate demand to remain fairly robust and constant,” he told OBG.

Some challenges will need to be worked through, of course. Besides the euro debt crisis potentially shrinking European tourists’ disposable incomes, other obstacles include insufficient tourism infrastructure and a general lack of awareness of RAK as a tourism destination. These challenges should not be overstated, however. RAK’s tourism sector is competently addressing them, and the government is supporting these efforts through RAK TDA and the RAK Hospitality Group. Indeed, although challenges remain and will require further attention, overall market conditions indicate continued growth and a positive outlook for the industry.

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