Royal Caribbean cruise bookings from the Middle East surged in the first quarter despite a spate of safety scares that has shaken confidence in the global industry.
The cruise ship operator attributed the increase to a marketing drive aimed at boosting awareness among regional travellers.
"We are 30 per cent up, first quarter to first quarter [last year]," said Lakshmi Durai, the executive director, Middle East, at Royal Caribbean. "We still have a huge population that is [yet] to experience cruising, so potential is high. Awareness is being created."
Following the Costa Concordia disaster, in which the cruise ship ran aground off the coast of Italy, resulting in the deaths of at least 30 people, cruise companies including Costa and Royal Caribbean reported a decline in bookings worldwide.
In February, a fire broke out aboard the Costa Allegra, which was sailing near the Seychelles, and the ship had to be towed to port. Last week, crew members on the Azamara Quest, a cruise ship sailing off the Philippines, were injured in a fire. Azamara is a subsidiary of Royal Caribbean.
Travel agents said sales for Costa's cruises had been negatively affected.
"Certainly the Costa Concordia incident has impacted their sales and as a result hurt the pricing," said Ashok Kumar, the managing director of Cruise Master, one of the biggest cruise agents in the Middle East. "To overcome this impact, initially the pricing was dropped down to US$399 [Dh1,465] per person for a seven-night Mediterranean cruise and demand seems to be bouncing back.
"Other cruise lines like Norwegian and Princess are holding on to their prices with reasonable demand."
The cruise industry is also playing an increasingly important role in the UAE's tourism growth strategies. Growth over the past decade has been phenomenal in the sector. In 2001, Dubai received just 6,900 passengers on a handful of cruises that stopped in the emirate. Now, the UAE is considered to be the regional hub for the industry and last year Dubai received about 135 cruise ships with 375,000 tourists, according to figures from the Dubai Department of Tourism and Commerce Marketing.
By 2015, Dubai hopes to attract 180 cruise calls, carrying 625,000 passengers. In October, the emirate announced plans to build a cruise terminal to accommodate the expected growth in the number of passengers.
Abu Dhabi has plans to attract 300 ships and more than 600,000 passengers a year by 2030.
In the capital, MSC Cruises last year became the first cruise-ship company to use Abu Dhabi as its base for sailings.
Carnival, which owns Costa, last week said it did not expect the Concordia disaster to have a long-term impact.
"Since the date of the accident in mid-January our fleetwide booking volumes, excluding Costa, had declined in the mid to high single digits at slightly lower prices compared to the prior year," Carnival said.
"In addition, booking volumes for Costa were running significantly behind the prior year at lower prices, however, Costa had curtailed virtually all of its marketing activities during this period."
Ms Durai said Royal Caribbean had not had any cancellations for its regional cruises or cruises booked by Middle East travellers, and that its cruises around the Gulf had run at levels comparable to last year, close to capacity.
The Mediterranean is the most popular destination for cruises booked out of the region, she said.
Seventy per cent of bookings made within the Middle East are made by locals within those countries.
This year, Royal Caribbean plans to bring its newly refurbished Serenade of the Seas ship to Dubai for its cruises around the region.
rbundhun@thenational.ae
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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