United Arab Emirates Country Notebook & Four Seasons Marketing Plan

Steve Callis Carlos-David Islas-Labastida Renee Werner

April 25, 2006 Georgia State University

Table of Contents Topic Part One: United Arab Emirates Country Notebook I. Introduction II. Geography III. Economic Environment IV. Cultural Environment V. Business Customs and Practices VI. Political Environment VII. Legal Environment VIII. Marketing Research IX. Other Statistics X. Competitive Environment Part Two: Four Seasons Marketing Plan I. Target Market II. Product Adaptation/Modification III. Market Entry Strategy: Foreign Direct Investment IV. Pricing Strategy V. Promotion Mix VI. Conclusion 16 17 17 18 20 20 3 3 3 5 9 11 11 11 13 14 Page Number

Part One United Arab Emirates Country Notebook I. Introduction The United Arab Emirates (UAE) is a promising location for U.S. marketers to do business for many reasons among them: high and steadily increasing GDP, pro-business orientation of the countrys government, the stability of the countrys political and legal systems, and well-developed infrastructure. Also, the country has been actively pursuing ways to diversify its economy, which has historically been very dependent on oil. The Four Seasons is a premium 5-star hotel chain known for its elegance and pristine customer service. The hotel has many international locations, but currently has no presence in the UAE. However, there are many other luxury hotels in the country both of domestic and foreign origin, such as the Ritz-Carlton. The hotels in the country, particularly those in Dubai, do a very brisk business with both business and leisure travelers, as evidenced by the fact that this market has a hotel occupancy rate even higher than New York City. The sections that follow contain an overview of the important aspects of the United Arab Emirates, and the proposed marketing plan for the entry of the Four Seasons Hotel into this new market. II. Geography UAE is located in the Middle East between Oman and Saudi Arabia. The country also borders the Persian Gulf and the Gulf of Oman. Although most of the country is flat, the eastern side is quite mountainous. The climate is desert with very little rainfall, but it gets very hot and humid along the coast during the summer. Most of the land is flat and barren, and less than 1% is arable.1 III. A. Economic Environment GDP The economy of UAE is certainly thriving, and shows no signs of faltering in the future. The countrys GDP is $74.5 billion, and GDP per capita is $29,100. The GDP growth rate is 6.7%, almost 3

twice the rate of the United States.2 The wealth of this country is certainly attractive for marketers of almost any type of product, from basic necessities to luxury goods. In our case, this presents an excellent opportunity as a location for the Four Seasons, as a premium upscale 5-star hotel. Although the country has a rich economy, its difficult to place them in a definitive economic group. The wealth of the UAE economy comes primarily from oil production. Countries whose economies flourish almost solely because of oil arent generally counted among developed countries such as the United States and Japan.3 However, these rich countries dont seem to fit in the Less Developed Country (LDC) category either, because of their high GDP per capita. As a result, they seem to fit best in the Newly Industrialized Country (NIC) category, which falls between LDC and More Developed Country (MDC). Its notable that the country is taking steps to diversify its economy to decrease reliance on oil production. For example, Dubai has become a leading tourist destination with 5 million tourists per year. Their goal is to attract 15 million per year by 2010. Dubai actually has a 30year strategic plan that specifically states that they plan to become a developed economy by 2010 by diversifying into areas of tourism, trade and commerce.4 This is another plus for the luxury hotel business, as it fits well into the countrys plan to diversify economically. B. Economic Risk Because the economy of the country is heavily dependent on the petroleum industry, it is very susceptible to fluctuations in the price of oil. However, this risk should be on a trend to decrease in the future as the country successfully diversifies into other sectors. Inflation isnt a big problem the inflation rate has been approximately 4% for the past few years. The exchange rate also doesnt contribute to economic risk the Emirati Dirham (AED), which is the countrys currency, has been fixed to the U.S. Dollar since 2002.

C.

Population Demographics The countrys population is 4 million with a growth rate just over 1.5% and a staggering 80%

being non-UAE nationals. 87% of the population resides in urban areas. Household sizes are fairly large, with an average of 5.5 people per residence.5 There are more men than women, and relatively higher numbers of young/middle-aged residents. D. Infrastructure UAE has very well-developed transportation, communication, and energy infrastructure. As of 2004, the country had 35 airports and 2 heliports. The existence of several international airports is of major importance, considering the drive for tourism and commerce. They also have an excellent system of roads connecting all major cities, and all the roads are paved. Although there is currently no rail system, this is being considered for the future. UAE has one of the highest Internet and cell phone usage rates in the Middle East. In fact, about 74% of the population uses a cell phone, and 28% use the Internet.2 All of these factors contribute toward UAE being a convenient place to do business. IV. A. Cultural Environment Cultural Values The Arab countries are treated as a whole by Hofstede.6 Large Power Distance (PDI) (80) and Uncertainty Avoidance (UAI) (68) are predominant Hofstede Dimension characteristics for the countries in the region. These societies are more likely to follow a caste system that does not allow significant upward mobility of its citizens. They are also highly rule-oriented with laws, rules, regulations, and controls in order to reduce the amount of uncertainty, while inequalities of power and wealth have been allowed to grow within the society. When these two dimensions are combined, it creates a situation where leaders have virtually all ultimate power and authority, and the rules, laws and regulations developed by those in power reinforce their own leadership and control. It is not unusual for new leadership to arise from armed insurrection the ultimate power, rather than from diplomatic or democratic change. The high Power Distance (PDI) ranking is indicative of a high level of inequality of 5

power and wealth within the society. These populations have an expectation and acceptance that leaders will separate themselves from the group and this condition is not necessarily subverted upon the population, but rather accepted by the society as their cultural heritage. The high Uncertainty Avoidance Index (UAI) ranking of 68 indicates the societys low level of tolerance for uncertainty. In an effort to minimize or reduce this level of uncertainty, strict rules, laws, policies, and regulations are adopted and implemented. The ultimate goal of these populations is to control everything in order to eliminate or avoid the unexpected. As a result of this high Uncertainty Avoidance characteristic, the society does not readily accept change and is very risk adverse. The Masculinity index (MAS), the third highest Hofstede Dimension is 52, only slightly higher than the 50.2 average for all the countries included in the Hofstede MAS Dimension. This would indicate that while women in the Arab World are limited in their rights, it may be due more to Muslim religion than a cultural paradigm. Heres what the UAE president has to say about the role of women: 7
"Nothing could delight me more than to see Woman taking up her distinctive position in society... Nothing should hinder her progress... Like men, women deserve the right to occupy high positions according to their capabilities and qualifications. We expect our young women to support and to proceed in accordance with all that is undertaken by their brothers, the young men of the United Arab Emirates, so that there may be fruitful cooperation between them in all spheres." And his wife, Sheikha Fatima bint Mubarak, says: "We have not yet reached the target for which we strive, but we are sure that we are making substantial progress along the right path."

The lowest Hofstede Dimension for the Arab World is the Individualism (IDV) ranking at 38, compared to a world average ranking of 64. This translates into a Collectivist society as compared to Individualist culture and is manifested in a close long-term commitment to the member 'group'; that being a family, extended family, or extended relationships. Loyalty in a collectivist culture is paramount, and over-rides most other societal rules. B. Rituals8 Music is traditional. The United Arab Emirates are a part of the Persian Gulf khaleeji tradition, and is also known for Bedouin folk music. Distinctive dance songs from the area's fishermen are also 6

well-known, but the country's most famous performers are Ahlam, the first female pop star in the Gulf, Aithah Al-Menhali, and Ali Burrogha, who has now requested that his recordings be banned as he is living a strict Islamic lifestyle. Other singers from the United Arab Emirates include Samar, Reem, Rouwaida, and Abdallah Belkhair among others. The names of the streets are not respected. In Abu Dhabi as well as in Dubai, the usual street names are not necessarily those written in the street signs or in the maps. For example, in Abu Dhabi, the 7th street Zayer Road on the right of Airport Road is known as Elektra Road as that is where all electricians are located. In Dubai, the street names as Trade Center Road is indicated as Khalifa Bin Zayed Road. Welcome Packages are used in corporations to incite Emiratis to work. Most of the Emiratis do not need wages as they already have high shareholder incomes (dividends) from the oil companies. Thus, they are not incited and do not have any motivation to work. As a consequence, new laws have been passed to oblige companies to hire local people. Then, companies give them gifts to work. One of the gifts are the Welcome Packages that include coupons, brochures, and menus for the employees and their families. If you enter the residence of an Emirati, it is polite to remove your shoes. Traditionally, Arab people sit on the ground although there are more and more chairs. It is forbidden to cross the legs and an Arab should never see the sole of the shoes as it is an insult. Men and women do not mix in public. When someone is invited with his wife, she will be invited in the districts of the wife. It is impolite to ask an Emirati news of his wife and daughter, and preferable to ask about his family and children in general. The coffee ceremony is important. A tradition strongly anchored in the spirit of the Emiratis as it is a true ancestral ritual. Guests have to hold the cup in the right hand, ask for more cups (it is a sign of courtesy) and to shake it several times before drinking it.

C.

Symbols

Language The official language is Arabic. English is widely understood and ranks alongside Arabic as the language of commerce9. Even though there is no particular mother tongue in the Emirates (because of the diversity of Arab dialects), we can consider that the Arabic-speaking people as a whole constitute a kind of majority of language, culture and religion. Nearly 60 % of the population speaks one of the many varieties of Arabic: Arabic of the Gulf, Arab shihh, Saudi, Omani, Egyptian, Jordanian,

Palestinian, Lebanese, Syrian, Sudanese, Yemenite, and Iraqi. All the varieties of Arabic belong known Semite group of the Hamito-Semitic family (or Afro-Asian). The United Arab Emirates developed a linguistic policy of Arabization since their independence. The Article 6 of the Constitution of December 2, 1971 proclaims that the Union will belong to the great Arab nation to which it is bound by religion, language, history and common destiny. The people of the Union will be unique and belong to the Arab nation. The Article 7 declares that Arabic is the official language: Islam is the official religion of the Union. Islamic Charia is the principal source of the legislation in the Union. The official language of the Union is Arabic.10 Aesthetics Despite their Abaya (black on-coat and veil), women in UAE are very vain. In general, people in UAE are very fashionable, and they enjoy keeping up with the latest trends. Men are always neat in their Dishdash (white dress). Foreigners have to avoid miniskirts and shorts (Although Dubai is more tolerant) by respect for the traditions and habits of their interlocutors. D. Belief System including Religion
The predominant religion for these countries is Islam, the practice of the Muslim faith. More than 80 % of the population of the UAE is non-citizens. Virtually all of the country's citizens are Muslims; approximately 85 % are Sunni and the remaining 15 % are Shi'a. Foreigners are predominantly from South and Southeast Asia, although there are a substantial number from the Middle East, Europe, and North America. Although no official

figures are available, local observers estimate that approximately 55 % of the foreign population is Muslim, 25 % is Hindu, 10 % is Christian, 5 % is Buddhist, and 5 % (most of whom reside in Dubai and Abu Dhabi) belongs to other religions, including Parsi, Bah's, and Sikh. Most of the Sunni citizens adhere to the Maliki legal tradition. Some Sunnis of the Wahhabi sect (followers of a strict interpretation of the Hanbali legal school) live in the Al Buraymi Oasis, and some who follow the Shafi'i legal school live along the Al Batinah coast. Although varying from emirate to emirate, the degree of religious freedom afforded non-Muslims is greater in the UAE than in Saudi Arabia and Qatar. For example, non-Muslims are permitted to worship but not to proselytize. There are several large Christian churches and schools in the UAE, primarily in Dubai and Abu Dhabi.11

E.

Thought Processes Emiratis are long-term oriented in their thought process. Concerning rationality, they are more

emotionally oriented even if western customs are more and more present and some rationality is making its way in the decision process. V. A. Business Customs and Practices Authority and Decision Making As shown by the low Individualism Index (38), the decision making process of the Emiratis is very collective, they focus on belongings to target groups that make the decisions. Moreover, the High Power Distance Index indicates that there are several hierarchical levels. The decision makers are separated from the rest of the group. As a consequence, the decisions are taken by the top management of corporations. Nevertheless, the decision making system is getting younger as the number of young university graduates joining corporate structures is increasing steadily12. B. Management Objectives and Aspirations Security and Mobility: Security and mobility are not a big issue as dividend income can easily back up a loss of job. Personal life: Personal life is more important than work. Emiratis dedicate a big amount of time to leisure and religion. 9

Affiliation and Social acceptance: Working in a corporation could be seen as not having enough revenue to maintain ones lifestyle. However, owning a corporation or being a member of the board of directors is very well seen. Power and Achievement: Social barriers exist to achieve high goals when starting from the bottom of the hierarchy. The level of achievement and power increases with the position in the hierarchy. C. Communication Styles

Here are some important points to be aware of regarding communication in the country: Names are often confusing. Its best to get the names (in English) of those you will meet, speak to, or correspond with. A foreigner should learn both their full names and how they are to be addressed in person before they meet. Communication is slow, and one should not feel obligated to speak during periods of silence. "Yes" usually means "possibly". Meetings are commonly interrupted by phone calls and visits from friends and family. The person at a meeting who asks the most questions is likely to be the least important. The decision maker is likely a silent observer. A customary greeting is salaam alaykum. Shaking hands and saying kaif halak follows13. D. Formality and Tempo

Local businesses and foreign companies differ in working hours: Local businesses: 08.00-13.00; 16.00-20.00 Thursdays: 08.00-12.00 Foreign companies: 08.00-18.00 This difference is driven by the necessity for local people to pray. Foreign companies, as Emiratis do not necessarily need to work, have a majority of expatriates which have other work cultures.

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E.

P-time versus M-Time

Punctuality is important, expected and appreciated14. F. Corruption/ Bribery Index15

The UAE is ranked 30th in the Corruption Perception Index made by Transparency International. The value of the index is 6.2 out of 10, that is to say above the average (5) and it means that people and country analyst have an above-average perception of the country. It is the highest index among all the Arab countries, which indicates a favorable climate to investments in the country.

VI.

Political Environment UAEs government is a federation, with certain powers delegated to the federal government, and

others reserved to the emirates. The government is fairly stable, with no major administration changes anticipated in the near future. According to the Economic Intelligence Unit, UAE has a political risk rating of C. (A=lowest risk, E=highest risk)16 Political tension in the region is high, particularly with the ongoing conflict in the nearby country of Iraq. However, the Bush Administration views UAE as an important ally to the United States. VII. Legal Environment The legal system in UAE is divided, depending on the type of issue involved. Criminal, civil and commercial issues are resolved using code law, while family and religious disputes are resolved with Islamic law. The legal system is generally regarded as being well-established and fair. The country has laws in place to facilitate commercial transactions and protect intellectual property. 17 UAE is a member of the World Trade Organization, having joined in 1996.18 VIII. Marketing Research The UAE, as noted earlier, is a highly developed country with strong economic conditions, especially when considering its position within the Middle East. Because of its expansive and continued growth, overall market research is readily available regarding many of its industries and more specifically the tourism industry. However, to better understand the dynamics of collecting research, the 11

following will assess the availability of secondary data and the challenges presented with capturing primary data. Secondary market data research on the UAE is readily available and easily accessible. Since the country, specifically within many of its emirates, is highly developed and experiencing tremendous growth, there is much information provided on its economic conditions, primary industries, market trends and opportunities, and consumer information. Through the proliferation of the Internet, there are many government and industry sources available to marketers for foreign investment analysis purposes. Caution must be taken, however, regarding the reliability of some secondary data offered through sources outside of governmental sites. Yet, the risk of collecting unreliable secondary data is mitigated due to the UAEs more developed and westernized state. Primary data is a good source for collecting detailed information specific to a marketers core objective; however, capturing this type of information comes with many challenges. In crafting a survey for primary research, one challenge presented is the language barrier to overcome by a foreign marketer. The official language in the UAE is Arabic, therefore requiring careful translations to ensure the key objectives are met. One positive regarding language is that English is also spoken within the country and is the primary communication method when dealing in business transactions.19 Depending on a marketers objective in collecting primary data, it may be advantageous to create a survey in English that elicits the needed response. Another challenge presented in collecting primary research is that the population of 4 million is only made up of 15% - 20% national citizens. This is a staggering statistic and would negatively impact a marketer who would like to survey citizens for information because the survey sample size is dramatically reduced to approximately 200,000. Thus, finding the appropriate survey pool may be difficult. A final challenge to collecting primary data is that the culture of UAE citizens is one of trust and strong relationships, which one can conclude that the willingness to share information may be low. To assist in overcoming any of the challenges of collecting primary data in the UAE, it is critical for the marketer to use a local agency to assist in the process. Fortunately, there are 12

well over a hundred marketing firms operating within the UAE which could assist in a marketers efforts.20 IX. Other Statistics The UAE is a fast developing country, primarily due to its immense oil and gas reserves. It currently houses 10% of the worlds oil and 5% of the worlds gas, which has led to its prosperous environment. The oil and natural gas sectors make up almost 32% of the U.A.Es GDP. Other primary industries in the country and their GDP contributions are Agriculture, such as vegetables, fish, dates, dairy and poultry, (3%), and Services, such as trade, government, and real estate, (44%).21 A. Foreign Investment Opportunities The UAE offers vast opportunities for foreign investors. With petroleum serving as the catalyst for growth in the country, tremendous foreign investment opportunities exist, especially within industries outside of oil. In addition to a very strong economy and high per capita income, the nation does not charge any corporate tax or income tax and has a relatively low import duty. It currently has sixteen free trade zones with more in development that offer foreign investors unique benefits such as 100% ownership rights.19 These reasons collectively create a favorable environment for foreign

investors. The U.S., in fact, has over 500 companies doing business within the U.A.E. ranging from Boeing to Ford to Wendys Restaurants.19 To further expand its trade relations, the U.S. and UAE began negotiations in 2005 for a free trade agreement to further expand opportunities for foreign investment. However, these have recently been postponed due to the controversial U.S. port agreement to be controlled by a Dubai based company.22 Because the UAE is focused on reaching the development state of a more developed country, its foreign investment opportunities reflect such needs to achieve its goal. High demand foreign investment opportunities would include security and safety equipment; IT equipment and services, medical equipment, services and supplies; architecture, construction and engineering services; air conditioning

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and refrigeration equipment; environmental and pollution control; sporting goods and equipment; water and power projects.19 B. International Trade Statistics The major exports for the UAE included crude oil, natural gas and other petroleum products, dried fish, dates, and re-exports with Japan, India, Singapore, and Iran serving as the major export partners. The country is the third largest trading partner for the U.S. in the Middle-East, and runs at a trade deficit with the U.S.; importing four times as much as it exports. The UAE exported a record $103.1B in 2005, primarily led by the increased oil prices and production exports. This trend is anticipated to continue as its expected the country will export $106B in 2006.23 The UAE imports machinery to assist in its rapid development, consumer goods to satisfy the largely wealthy population, and food. The largest suppliers to the UAE are Western Europe, Japan, U.S. (6.5%), China and India. The estimated import value in 2004 was $54.2B. However, with the foreign investment opportunities, imports should continue to trend positively around some of the critical need products, such as medical equipment.21 Regarding the exchange rates, the UAE exerts a single currency exchange rate that was fixed to the U.S. dollar in 2002. The current rate of exchange is 3.67 Dirham to one U.S. dollar. There are no significant trends regarding the exchange rates, as it again is fixed. Plus, there are very little restrictions on the currency exchanges with exception to Israeli currency and the currencies of countries that are currently under U.N. sanctions. Payments or currency exchanges on imports and exports are immediate and do not experience any delays.19 X. Competitive Environment The location of the UAE makes it ideal to attract tourists and business travelers, as it links Europe, SE Asia, and Africa. The country consists of varied terrain, beautiful coastlines, luxurious and wealthy cities, crime-free and hospitable environment, westernized flair, and a booming economy, all of which has led to the immense growth in the tourism industry. To specifically address Dubai, the 14

anticipated location for the Four Seasons Hotel, its estimated that annual growth in tourism contributes as much as 20% of the emirates GDP.24 In fact, the tourism industry is expected to overtake the oil industry in GDP contribution for Dubai in the near future. These factors alone make Dubai a hot spot for the hotel industry, which is evident through the immense competitive presence of domestic and foreign hotels located there. The Four Seasons Hotel, which currently has no presence in the UAE, will operate as a 5-star hotel, consistent with its current business model. To that extent, the Four Seasons will face both direct domestic and foreign direct competition with other current 5-star hotel operations. Currently within Dubai, there are close to 300 hotels that served the five million guests that visited in 2004 and that generated $1.2B in revenue from business travelers alone.25 Some of the direct domestic competitive brands include the One & Only Royal Mirage, Burj Al Arab, and Al Maha Desert Resort & Spa, which are considered a few of the top luxury hotels in Dubai.26 U.S. based hotels have also entered the Dubai luxury hotel market, such as the Ritz-Carlton (2005 Dubai Quality Gold Award recipient), the Hyatt with its Park Hyatt Dubai and Hyatt Regency, and the Hilton with its Hilton Dubai Creek and Hilton Jumeirah Dubai hotels.27 These competitors to the Four Seasons offer the luxurious features and amenities expected at a 5star hotel. Each consists of luxury suites, many high-end restaurants and lounges, spa services, and some with golf courses adjoined. The hotels also cater to corporations and business travelers with the presence of meeting rooms and convention or event arrangements. The direct domestic competitors primarily incorporate middle-eastern designs throughout their resorts, whereas the foreign direct competitors maintain their corporate brand designs with hints of middle-eastern accents. Regarding marketing efforts to reach their target patrons, more affluent tourists and business travelers, the hotels maintain standard promotional channels and strategies. The promotional channels to reach potential travelers include the hotels website, partnerships with online and traditional travel agencies, and referral relationships with government and industry organizations and associations. The 15

hotels utilize promotional efforts through their marketing strategies, such as advertising and direct marketing, and their established channels, leveraged through travel services partners, by creating special travel and service packages and promotions to drive incremental business. To advance promotional efforts through advertising and direct marketing, the hotels must adhere to the regulations of the UAE, which for service industries, such as hotels, do not preclude them from marketing directly to the end consumer or advertising via television, print, and the internet.19 Lastly, the prices of the competing hotels do vary significantly, ranging from a high average price of $1,284 at the Burj Al Arab and to a low average price of $269 at the Hilton Dubai Creek. Although the 5-star local and foreign hotels offer similar amenities and services, the pricing for the local competitors is on the higher end of the price variance because they tend to attract the foreign tourists who are looking for a unique and authentic middle-eastern experience. The foreign direct competitors on the other hand are on the moderate to low end of the pricing variance mentioned above, albeit still high prices, assumingly to position themselves to better penetrate the market overall and to attract the locals within the region whose culture is willing to pay higher prices for the perceived high-quality of services provided by U.S. firms. 19 Part Two Four Seasons Marketing Plan I. Target Market As previously mentioned, the hotel industry in Dubai is in high demand to support the tremendous growth in tourism and business travel. There is a high concentration of 5-star luxury hotels; however, the demand for rooms is so high that there are not enough hotels to support it.
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Dubai is

currently a large commercial center in the middle-east, and with other major projects currently underway, such as Dubailand, Palm Islands, and another major international airport, the city is setup to continue to attract tourism and business travelers.4 Factoring in the strong economic conditions, complementary cultural climate, travel and tourism industry demand, and favorable foreign investment conditions, Dubai is an ideal market for a Four Seasons Hotel. The hotel will focus to attract the foreign tourist, domestic visitor, and business traveler. 16

This target customer base will be centered on the middle class and affluent tourist. It will also include a focus on regional business conventions, exhibitions, and business travelers that other regional nations, such as Singapore and Hong-Kong, and competing hotels pursue. II. Product Adaptation or Modification To attract and penetrate this target market, the hotel will be built on Dubais expansive and beautiful coastline. The core components of the hotel will continue with its existing business model centered on luxury rooms and suites, world-class restaurants, spa services, business services, meeting and events, and other special activities such as golf, tennis facilities, fitness rooms, water sports, and other recreational activities. As mentioned previously, the culture in this region values the perceived high-quality of services received from U.S. companies. Therefore, the overall hotel aesthetics and atmosphere will adhere to the Four Seasons central design guidelines that are very westernized but also look to include accents and tastes accustom to the middle-east. To this aim, the Four Seasons should

leverage its U.S. roots to incorporate the American culture within many of its amenities, such as offering fine dining on American cuisine within one of its restaurants and spa treatments that are accustom to American spa services. For corporations and business travelers, the hotel will look to offer wireless and TV Internet, in-room printer/fax machines, prepaid cell phone services, and convention/meeting planning services and accommodations to attract this market and ensure they have all required communication channels to maintain business at their fingertips. These modifications set the hotel apart from the competitors in terms of offering the complete package of services, specifically as it pertains to business travelers, and will enable the hotel to attract the foreign tourists and business travelers that are looking for a U.S. based luxury hotel with middle-eastern flair. III. Market Entry Strategy: Foreign Direct Investment Because the Four Seasons Hotel is a service, the entity will not be subject to exporting guidelines or regulations. It will enter the Dubai emirate of the UAE through foreign direct investment market entry. To operate as a foreign entity within Dubai, the UAE does have ownership restrictions that 17

mandate a minimum 51% UAE national ownership, ensuring local entities are the primary shareholders in the operation.19 Although 51% shareholder ownership is maintained by a local UAE entity, the

primary management and control of the Four Seasons Hotel is assumed by the firm. Taking this approach will require capital outlay for construction of the facility; probably financed through a local bank which is the primary source for investment in non-oil projects. The factors affecting the choice of direct foreign investment include cost, capital, control, character, and continuity. The cost of operations and capital involved will be assumed by the Four Seasons ownership structure of the hotel, again with 51% of the ownership resting with local shareholders. The control of hotel operations will be assumed by and in accordance to Four Seasons corporate standard operations, but as with any ownership structure, the hotels performance must meet the expectations of the shareholders. Because the hotel will need to contract and partner with local companies for the development and promotion of its core services, such as construction contractors, travel related entities and travel agencies, marketing firms, etc., the character of these firms must have the core competencies, relevant experience and strategic fit to align and meet the objectives of the hotel. In conjunction with a strong character fit, the hotel will need to analyze and assess these companies to ensure that they have sustainable operations and will be in business long-term for continuity purposes. IV. Price determination Overall, the Four Seasons Hotel will pursue a skimming pricing strategy that enables it to price comparatively to what the market will bear and maintains a fit with the overall brand image of Four Seasons as a 5-star premium hotel. The hotel will also utilize full costing that incorporates both fixed and variable costs to determine target profit margins that will influence its pricing strategy. The following is a range of prices for the rooms offered: Single room: 650 AED Double room: 750 AED Suites: from 800 to 1250 AED. 18

These prices were established taking into account the subsequent factors: People expect high quality products The price range for a single room at a five-star hotel is AED 250-AED 1,350 and AED 350-AED 1,813 for a double room. (68-360 AND 95-500 USD) A. Taxes and Tariffs19 Room rates are subject to 15% tax and services charge No corporate taxes exist B. Administrative Costs Emiratis must own at least 51% of foreign companies UAE national workers will need to be incited to come to work, so the cost of labor can be high C. Middlemen and Transportation Cost Foreign companies and individuals are not permitted to own land or real estate in Dubai. All property must be rented or leased for the purposes of running a business. As a result, the company does not build equity through the property in its business investment. We will need to work with local agents and contractors to procure the real estate. Also, we will work with local middlemen in promoting the hotel, such as travel agencies and marketing firms. All required middlemen to the development and promotion of the hotel will encompass a certain amount of cost. D. Exchange rate fluctuations29 Due to its fixed peg to the US Dollar, the AED depreciated as a result of the USD against most major currencies. During 2004, the Dirham depreciated against the Euro (9.2%), the GBP (10,2%), the JPY (7,3%) and the CHF (7,3%).The exchange rate of the EAD remained unchanged against all GCC currencies at the end of 2004. As a consequence, foreign investments in the UAE are less expensive (especially from Europe and Japan) and despite the fact that European and Japanese product became expensive, since we would be dealing with local products, no major impact for Emiratis can be forecasted. 19

E.

Inflation

The inflation rate is quite low, compared to other Arab countries, of 4.6%. V. Promotion Mix We plan to engage the services of a local advertising agency, to take advantage of the expertise that such a firm would already have about the local market. Specifically, we would choose a firm that has experience working with other luxury hotel chains, as they would have the experience to see what type of advertising campaigns work best to gain momentum in conjunction with a new entry in the market. Our preliminary plan would be to pursue a mix of promotion types including print and Internet. We will gain listings with all the major online travel agencies, such as Travelocity and Expedia, along with UAE-specific travel listing sites, such as the one maintained by the Dubai Government-the Department of Tourism and Commerce Marketing. Languages used in advertising would include both Arabic and English, and would feature messaging that was both respectful and elegant. This is based both on the high-end image of the Four Seasons hotel, and the fact that we want to fit within the conservative culture of the country. The message of the advertising will target both business and leisure travelers. UAE is a big destination for business travelers, and we will target messages about our business and convention services to that group. Our ads targeted toward leisure travelers will emphasize other amenities offered by the hotel, such as the spa services. Our overarching message will feature the high-quality experience offered at the Four Seasons hotel; as we mentioned earlier, locals within the region value high-quality products and services provided by U.S. firms. VI. Conclusion In conclusion, we feel the introduction of a Four Seasons hotel in Dubai would be a successful venture for many reasons, including: The countrys robust economy, with a high per-capita GDP 20

 High hotel occupancy rate in Dubai The regions efforts to diversify its economy into several areas outside the petroleum industry, tourism being one of the most quickly growing industries There are some disadvantages to the selection of Dubai for a new hotel location, such as the political risk, and the required local ownership percentage. However, based on our extensive research on the region, we feel that the advantages far outweigh the drawbacks, and the new Four Seasons hotel location will certainly be a successful financial investment. References
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Central Intelligence Agency: http://www.odci.gov/cia/publications/factbook/geos/ae.html#Geo Central Intelligence Agency: http://www.odci.gov/cia/publications/factbook/geos/ae.html#Econ 3 Wikipedia: http://en.wikipedia.org/wiki/Developed_country 4 HSBC Business Profile Series United Arab Emirates. Eleventh edition, fourth quarter 2004. 5 http://www.unhabitat.org/habrdd/conditions/westasia/untdem.htm 6 Geert Hofstede Cultural Dimensions: http://www.geert-hofstede.com/hofstede_arab_world.shtml 7 Arab Net: http://www.arab.net/uae/ue_womenrole.htm 8 Expatris: http://www.expatclic.com/eofi/article.php3?id_article=86 9 Dubai Internet Pages: http://www.uae-pages.com/information/language.html 10 Universit de Laval: http://www.tlfq.ulaval.ca/AXL/asie/Emirats_arabes.htm 11 Wikipedia: http://en.wikipedia.org/wiki/Islam_in_the_United_Arab_Emirates 12 All Business: http://www.allbusiness.com/periodicals/article/715174-1.html 13 UAE Business Etiquette: http://www.cyborlink.com/besite/uae.htm 14 International Business Center Newsletter http://international-business-center.com/international_newsletter/volume2_issue5.htm#Tips 15 Transparency International: http://www.transparency.org/policy_and_research/surveys_indices/cpi/2005 16 ViewsWire: http://www.viewswire.com 17 MGI Worldwide: http://www.mgiworld.com/doingbusiness/BusinUEA.php 18 World Trade Organization: http://www.wto.org 19 Doing Business In United Arab Emirates: A Country Commercial Guide for U.S. Companies: http://www.export.gov 20 http://www.middleeastmediaguide.com/adagencies.htm - List of Marketing Firms in the Middle East/UAE 21 U.S. Department of State: http://www.state.gov/r/pa/ei/bgn/5444.htm 22 U.S./UAE postpone Free Trade Agreement - http://usinfo.state.gov/mena/Archive/2006/Mar/10-730043.html 23 UAE Current Account Surplus Hits Record in 2005 - http://www.uaeinteract.com/news/default.asp?ID=12 24 http://www.uae.gov.ae/Government/tourism.htm 25 http://edition.cnn.com/2004/TRAVEL/05/10/bt.dubai.hub.growth/index.html 26 http://www.worldtravelawards.com/index.php/wta/nominees_2006/2005/middle_east 27 http://www.ameinfo.com/80473.html 28 http://travel.timesonline.co.uk/article/0,,19270-1290469,00.html Hotel Demand 29 UAE Central Bank 2004 Annual Report: http://centralbank.ae/pdf/Annual/annual04E.pdf

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