Ras Al Khaimah targets property and tourism for economic growth

It may have a population of only 195,000, but it has ambitious growth plans and is pumping money into various projects. Property is the obvious place and 31 real estate developments are underway or at the planning stage.

It is also a growing tourist destination, particularly among those already living in the GCC or who want to visit the region but don't want the 'Dubai experience', as it can offer both a beach and mountain experience.

The government is predicting that by 2020 its sub-200,000 population will have leapt to 750,000 people or more.

Construction projects to cope with that population explosion include Mangroves Island, which will house 16,000 people, the three-phase Mina Al Arab, the 270 hectare Marjan Island, which will house 10,000 residents once complete and the smaller Emirates Gateway, that will have a population of 2,500.

But such sudden expansion comes with both logistical and emotive issues. Logisitcal involves ensuring it has simple things in place such as enough power and the ability to supply and take away water.

The emotive is a fundamental question of how it sees its status. Is Ras Al Khaimah a suburb of Dubai - as Sharjah has become - or is it a stand-alone emirate with the economy to grow in its own right, the infrastructure to encourage businesses to locate or relocate in the region and the attractions to build a sustainable tourist industry?

David Yaw, regional managing director at project management company Halcrow International Partnership, said the infrastructure challenge faced by RAK is no different to those in other big developments, including the Olympic Village in London. And certainly there are plenty of projects to ensure utilities are in place. Also, some are recommending that it moves forward with a coal-fired power plant to handle its energy needs, arguing that Ras Al Khaimah cannot rely on the other emirates.

Tourism

With tourism, Ras Al Khaimah has the advantage over more popular destinations such as Dubai of having unspoilt beaches and the mountains. It aims to increase tourist numbers from 500,000 today to 2.5 million by 2012 - a big rise for the emirate (although still tiny compared to Dubai which by then hopes to have 15 million tourists a year). To attract them, it plans to push the number of five star hotel rooms up from 1,400 to 7,500 and have at least 30 hotels.

In terms of revenue, hotels are performing extremely well, with high occupancy rates. And the emirate is no longer a cheap alternative to Dubai, because as its popularity has risen, so have room rates without damaging booking numbers. Speaking at the MEED Ras Al Khaimah conference, Ivor McBurney, vice president Middle East at Hilton Hotels, said: '[People] spend a lot of time talking about Abu Dhabi and Dubai, but Ras Al Khaimah has the best RevPar (revenue per available room) growth of the past few years.'

To hit the magic 2.5 million tourists, it not only needs to undergo a massive building programme but also need to ensure it can ship those people in, around and out of the emirate. The airport is being regenerated so that it can handle more aircraft and passengers, with a parallel runway being built to allow more planes to taxi at any one time. Links with Dubai airport will also need to be improved though, as at 1.5 million - the number of passengers it can service post-upgrade - it still falls one million short of the target tourism number.

Also, its national airline, RAK Airways is still new, operating to few routes and concentrating more on the labour market than tourists. Although it plans to open new routes and buy more planes over the next few years, the destinations are still largely those for the labour market.

Property investors

With so many property investors pouring in - many on the back of the price rises experienced by Dubai - the question is, are those people buying to live, let or use as a holiday home. The fear is that too many people buying property for use as a holiday home will have a long-term negative affect, because although property developers will hit their numbers, local businesses will not have enough sustainable trade. And that will then hurt local employment prospects.

Chris Picken, vice president of sales and marketing at developer Khoie - which is building properties in La Hoya Bay - said many people buying in RAK do see it as an investment opportunity or holiday home, but accepted that is not ideal long term. 'In an ideal world that is not what the region would want. Initially though, you have to entice the people to come here. You've got to deliver property, education and healthcare so that individuals will feel relaxed in an environment.'

It means the emirate must also work hard to attract businesses, and with office space both at a premium financially and physically in Dubai, Ras Al Khaimah has a good opportunity. Picken pointed to the favourable tax incentives and the ease with which a business can be set up in the region. But he said housing staff has been an issue. 'The issue has always been where do I house my staff? That is being [improved] with the developments in Al Hamra, The Cove with its villas overlooking the sea, Mina Al Arab and La Hoya Bay.'

A Dubai suburb

In the UAE, the Sharjah roads are a well-known bottle-neck between RAK and Dubai. If traffic flow is improved, would that mean more people would see the emirate as a suburb where they live, driving to Dubai everyday to work? Mark Morris Jones, a director at CB Richard Ellis, felt that provided the right measures were put in place, even with free-flowing traffic it would not face that problem.

'Ras Al Khaimah has its own character that is dictated in a large part by the natural landscape and people that you have here. And those two things together are far too strong to let that happen. There's going to be a definitive point of difference and that's what they have to concentrate on and perpetuate. And what it will mean is that RAK will become an independent emirate. It will not become a suburb of anything.'

The immediate future for Ras Al Khaimah in many ways follows that of Dubai - a massive building programme that will see the emirate clogged with all that comes with so many construction projects. But over the course of the next 10 years, the redevelopment will put it in good stead as a good place to live and an attractive tourist destination.

See also:
$2.2bn RAK hospitality training zone to improve industry service
Should investors buy property in Ras Al Khaimah?