World's most glamorous celebrities check into the Gulf

Far removed from the glitterati, you get a sighting of the odd CEO, be it Michael Storey of the satellite operator Inmarsat or Carlos Ghosn of the newly revived Nissan. And if you're really lucky, you might catch a glimpse of the highly reclusive Michael Schumacher, the reigning Formula I champ, looking to unwind on the beaches of Dubai.

Celebrity spotting has become the new rage in Dubai's tony hotel lobbies as the emirate witnesses an unprecedented run in the gossip columns. So much so that a market in niche, distinctly upscale hotels has sprung up to latch onto the craze. 'Niche hotels, whether focusing on the leisure or business traveler, are a very recent phenomenon to the Middle East,' said a senior hotel industry source.

'But, as of now, only Dubai, Lebanon and, to a certain extent, Sharm El-Sheikh in Egypt have the necessary credentials for this. It is all about offering highly personalized services to meet even the most exacting of demands, all done in an aura of exclusiveness.

However, this is easier said than done.' Towering above all other contenders is Burj Al Arab, part of Jumeirah International, which is also the holding entity for the likes of Emirates Towers. Since its opening - after passing through a tumultuous period when time and cost overruns bogged down the project - Burj Al Arab has put Dubai on the global leisure map.

With its aura of architectural splendor - it is literally built on water - and the steep rack rates, the property has been deftly marketed overseas and has garnered a welter of favorable publicity. The bevvy of international jetsetters and Gulf-based princes who have passed through its suites have not hurt revenues either. Nor, of course, has the fact that room rates start at $1,500 a night.

Of slightly more recent vintage is the Royal Mirage, another beachfront property in Dubai done up in traditional Arabic decor. Targeting high net-worth European clientele, the property has built up quite a following.

Prince Walid bin Talal, the Saudi multi-billionaire - never one to miss out on an opportunity - has entered a joint venture to develop an 82 million dirham ($22.3 million) property in downtown Dubai targeted at the business traveler. The prince's other Movenpick investment, a resort in Lebanon, has seen all of its $300,000 chalets sold before it opening.

The Hilton chain is also targeting the same clientele and has just opened the 154-room Hilton Dubai Creek, all sharp angles and glass. According to management, 'We believe it will offer something completely different to the five-star hotel market in Dubai - an intimate, highly personalized style of service in contemporary surroundings.'

However, there are some within the hotel industry who have mixed views about the recent spate of such hotels. 'These niche hotels operate on some of the highest margins in the industry - on an average these would be about five to 10 percent over the norm,' said an industry insider.

'At the same time, in any downturn, they would also be the first to suffer, as has been amply proved by the experiences of some of the prestige properties in Dubai after the September 11th crisis. Even in normal times, their cost base would be higher, and they would be less flexible when it comes to pricing because that might cost them their exclusivity.'

Given Dubai's proclivity for excess, hotel developers seem only interested in investing in niche hotels. The development of the Palm Project will see 80 such properties, all of them offering the same unique selling point. A few of the premier business groups in Dubai have already committed sums of 100 million dirhams and up for a place in the sun on the Palm Islands.

In comparison, the niche hotel segment in Lebanon and Egypt is moving at a slower pace. Industry wags suggest that the weak economies of the two countries have dampened the enthusiasm of developers there. In the medium term, Lebanon, in particular, could witness a lot of inward investments into the hotel business from Gulf-based investors.

Egypt should not feel left behind. Saudi investors are the prime movers behind the ambitious $1 billion Heliopolis project - a planned town with commercial and residential blocks, and a five-star hotel property - being developed near Cairo. More hotels are either being planned or are well on their way to becoming a reality at other key locations in the country.

But developers shouldn't be too optimistic. 'The current trend could easily lead to an overkill situation in two or three years,' says an industry insider. 'This represents a very dangerous situation for both the niche hotels and their promoters.'