next big thing for the hotel industry? the rise and rise of the mixed-use development
When InterContinental Hotels Group launches its new properties in Dubai Festival City in November 2007, their hopes for success will be founded on their confidence in projects known as mixed-use developments. Springing up across the Middle East and indeed around the globe, they are offering a whole new business and leisure experience for tourists and residents alike. But what are these projects? And why are they becoming increasingly important in the global hospitality sector?
A winning combination
In basic terms, a mixed-use development is a master-planned community containing any combination of residential, commercial, industrial, institutional, retail, leisure or hospitality uses. They are challenging to create because of their size, complexity and cost and yet, despite these difficulties, they are one of the biggest growth sectors in urban planning. With figures suggesting that mixed-use developments now account for 20 per cent of all new space built in the USA, it’s unusual these days to find a large metropolitan area, anywhere in the world, based around distinct sectors for residential, commercial and retail use: increasingly, individuals have a much wider choice of places in which they can work, live and play – all at the same time. This phenomenon has been credited with revitalising urban areas previously in decline, or creating whole new destinations out of practically nothing.
Creating demand
The role of mixed-use developments in ‘Destination Creation’ is key for hoteliers. Major hotel groups, and especially InterContinental, have recognised that mixed-use developments, with their unique lifestyle proposition, create new demand for hotels of all types. As far as InterContinental is concerned, it’s a win-win situation: customers and guests have access to exceptional facilities outside the remit of a traditional hotel, while InterContinental, as owners and operators, enjoy enhanced profitability from the flow of business between different sectors. For example, someone who spends their day at an office on such a site might spend their lunch hour in the shopping area, before heading to the hotel for a workout in the gym and dinner with friends. Or, at the weekend, a resident could enjoy a round of golf and lunch in the hotel, before hitting the complex’s DIY store for his home improvement essentials.
Creating demand for hotel rooms in this way is especially important in the growth tourism markets of the Middle East such as Dubai, where the hotel industry is undergoing such rapid expansion that, despite buoyant expectations, there are fears demand will eventually outstrip supply. Tom Rowntree , Vice-President of Development for the Middle East and Africa at InterContinental Hotels Group, explains how the harmonisation of functions such as leisure and residential can actually create additional demand for hotel accommodation: ‘A golf course creates an opportunity to provide luxury residences which also leads to the construction of hotels and resorts. In turn, houses are built and for those living near a golf course or investing in an apartment it adds value to the property, creating more demand and need for more hotels and apartments.’
High level of investment
InterContinental Hotels Group is putting its money where its mouth is. Billed as a ‘World-Class Waterfront Lifestyle Resort’, Dubai Festival City is set to become a ‘must-visit’ destination for Dubai’s residents and tourists. 2.1 million square feet of retail space sit side by side with entertainment and leisure facilities such as a golf course and luxury marina, commercial areas, residential apartments and now more than 1,000 luxury hotel rooms created by the opening of three new properties from InterContinental: InterContinental Dubai Festival City, Crowne Plaza Dubai Festival City and InterContinental Residence Suites Dubai Festival City. The InterContinental Residence Suites are a first for InterContinental Hotels Group in the UAE, and are specially designed to cater for the needs of extended-stay guests. These hotels and residences offer superbly appointed rooms, extensive conferencing and sporting facilities and outstanding restaurants as standard, but their walking-distance proximity to an 18-hole championship golf course and a shopping centre which features more than 500 of the world’s top retailers, and 90 restaurants and cafés, adds a whole new dimension to their profile.
By any stretch of the imagination, opening three new properties on one individual site represents a huge investment, and it is a graphic demonstration of InterContinental’s confidence in expansion with particular emphasis on hotel-enhanced mixed-use developments. The group has recognised that developments of this kind can make new hotels economically feasible and, as already discussed, they can reap the benefits of custom which comes from the residential, leisure, retail and business sectors of the site. As Kasselis comments, however, it’s not just a one way street. Hotels themselves have an important role to play in making these developments a success: ‘The hotel brands within these developments come in very useful as they are the ones who have the marketing clout to make the destination known’.
A changing market
InterContinental’s new openings at Dubai Festival City are designed to reflect the maturing and changing demands of the tourism industry in Dubai, which continues to experience exponential growth year-on-year. By 2010, the Dubai Government predicts that more than 15 million tourists will arrive in Dubai compared to approximately five million in 2003. Many of these visitors will be individuals who are combining business with pleasure. To cater for this demand, it is predicted that 70,000 to 80,000 hotel rooms will be needed. But as Rowntree believes, it’s not just the luxury brands that need to make the most of this boom. Not all business travellers or tourists will be prepared to pay the prices that commanded by the five-, six- and seven-star hotels, he says: ‘The Holiday Inn Express and other budget hotels will have to soak up the business market and the millions of additional tourists who cannot afford to see the rates we see at the moment.’
Express by Holiday Inn, also operated by InterContinental Hotels Group, is reacting to this demand by opening its flagship property in the Middle East and Africa at Dubai’s Knowledge Village. This development is another example of how strategic location at a crossroads of business and leisure, and in the middle of the residential hotspot of ‘New Dubai’, will enable a hotel to benefit from trade from budget-conscious travellers and consumers hitherto uncatered for. Holiday Inn Express Knowledge Village is the first of 20 hotels planned across five GCC countries by the end of 2010, all of which will be positioned with similar consideration to the proximity of commercial, business, residential and leisure hubs.
Impact across the Middle East
Dubai’s reputation as a global centre for tourism and business is quite literally being built out of the sand, with mixed-use projects such as Dubai Festival City leading the way. But it’s not just the ‘new’ tourist destinations which benefit from projects such as these. Even Cairo, with a tourist industry founded on some of the most historic attractions in the world, has invested in the Middle East’s largest mixed-use urban development. With 750,000 square metres of space on a single piece of land measuring 115,000 square metres, CityStars Cairo is probably Egypt’s most ambitious project since the Pyramids themselves were constructed, and is larger than any other mixed-use project in Europe. With its combination of offices, residential apartments, retail outlets, amusement park and hotels, CityStars Cairo has quickly become a self-contained destination in its own right, popular not only with tourists but also with Cairo residents happy to avoid the traffic and parking problems they usually encounter when travelling between several different locations.
The 2005 opening of the InterContinental Cairo CityStars hotel at this landmark destination marked InterContinental’s commitment to this type of development in the Middle East two years before the properties at Dubai Festival City open their doors. As David Traynor, Area Director Sales and Marketing in Egypt states, such a project offers a flexibility often lacking in more traditional hotel environments: ‘Mixed-use developments can accommodate a variety of market mixes and budgets within one destination so you can cover everything from high-end management to corporate guests and from air crew, to long-stay travellers. Large scale events are also easier to cater for and the leisure sector is spoilt for choice.’ With luxury accommodation, fine-dining restaurants, versatile function rooms, spa and wellness centre as well as instant access to the twelfth largest shopping centre in the world, the InterContinental Cairo CityStars hotel within CityStars Cairo is part of a development which certainly lives up to that promise.
No limits
Mixed-use they may be, but there are no mixed messages coming from these developments, nor from InterContinental’s investment in them. Limited in scope only by the breadth of developers’ imaginations, their size and scale are set to increase even further. For the hotel and leisure industries, they mark a revolution in the way individuals all over the world can work, rest and play. Watch this space: for the mixed-use development, the future’s very bright.
