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Dubai metro unlikely to speed business growth

United Arab Emirates: Tuesday, September 08 - 2009 @ 12:21

The Dubai metro will be the first urban rail system in the Gulf and one of the most advanced in the world.

The driverless, fully-automated trains will offer the choice of luxurious first-class coach cars, and commuters will be able to wait for trains in air-conditioned comfort.

The government has spared no expense on the ambitious project, which has seen its costs rise by 75% above the original estimates to reach a projected $4.4bn by the time the second of the two-line metro system opens next summer.

The 52-kilometre Red Line, which will open to the public on September 10 from 6am, will run from Dubai Airport to Jebel Ali, but just 10 of the 29 stations on the route will be ready on opening day. Officials say the remaining stations will open over the coming months as surrounding developments reach completion. The 23-kilometre Green Line, which has 18 stations, is scheduled to open in the summer of 2010.

To encourage commuter use, the Dubai metro will be relatively inexpensive compared to rail networks in other cities, with the cost of travelling from one end of the Red Line to the other held at Dhs5.80.

Dubai officials are confident that the metro will help reduce traffic in the emirate, especially in some of the more densely populated areas of the city. Officials estimate the metro will carry 27,000 passengers per hour and 355 million passengers a year, once both lines are fully operational.

The emirate’s Roads and Transport Authority (RTA) also said that the introduction of the metro as a transportation system would lower the financial costs that result from the daily congestion on Dubai roads, which is estimated at over $1bn a year.

Short-term impact

While it is true that traffic is still a problem in a few high density areas, it is not nearly as bad as it was a few years ago when the plans for the metro were drawn up. In the past six to 12 months Dubai’s roads have improved noticeably as the population has shrunk due to the wave of layoffs that resulted from the financial crisis.

The easing of the traffic problem, along with the relatively few number of stations that will be opening and the challenges involved in connecting people from their homes to the metro stations, are among the reasons why some experts think the impact of the metro will be relatively minor, at least in the short term.

‘It’s really a wait and see to what level of impact the metro will have,’ says Matt Green, associate director of research and consultancy at CB Richard Ellis Middle East. ‘At the beginning it will be minimal, but its usefulness to Dubai will increase when more stations are up and running and connectivity to metro stations is improved.’

He believes that even though there has been a lot of hype about the rollout of the new rail system, it will take time for people to make the shift to using the metro as a regular part of their lives. ‘For a long time people will be sticking to driving a car,’ he told AME Info. ‘I don’t think we are going to see suddenly a huge impact. It will be more gradual.’

According to Green, businesses in areas such as Bur Dubai, which continue to have nightmarish traffic problems, will benefit from having a metro station. Developers or investors looking to build or purchase buildings in the region may also look more closely at Dubai and its improved infrastructure, with their eye on locations near the stations.

‘It’s a good bit of PR for Dubai during a time when things are difficult, and having that kind of investment in your infrastructure is always going to help attract outside investors who are looking at the Dubai market,’ he said.

Malls to get boost

Some retailers, especially the malls, are likely to get a boost by their proximity to metro, said Naeem Ghafoor, the chief executive of Skyline Retail Services consultancy in Dubai. However, he says there needs to be more parking near metro stations to encourage people to use the new transport system.

We are ‘creatures of convenience’, Ghafoor says, and the network of shuttle bus services that Dubai is rolling out to get people from their homes to metro is simply not as convenient as driving to a car park at the metro.

‘When you look at other major cities like London or Hong Kong, the malls themselves are well linked to metros,’ he said. ‘In Dubai, which metro station are people going to get on to get to you? Ideally, people should be able to leave their car at the car park, visit stores up and down the metro line, and not see their car all day,’ he noted.

One outcome of the new metro service we are likely to see are little communities cropping up around the metro stations, thus creating an opportunity for convenience retailers like express supermarkets, laundry services, and gift shops.

But otherwise, retailers should not expect much of an impact in the short term. ‘What drives revenues is the number of people using the metro, so you need density. When tourism starts to pick up again and the population increases, then there will be greater importance on finding more convenient modes of transport such as the metro,’ he said.

Tourism to be helped

Another industry that could benefit from new metro system is tourism. Dubai’s deputy ruler, Sheikh Maktoum bin Mohammed bin Rashid Al Maktoum, has said that he believes the metro will be one of the ‘major tourist landmarks in the country’.

He contends that the metro will ‘attract more holidaymakers to the UAE, giving a big boost to internal tourism and energising and diversifying the local economy’.

Tourism experts agree that the metro will be a landmark for Dubai, but is not likely to be the only reason that someone visits the emirate.

‘When people used to talk about Singapore they used to talk about its metro and how it was air conditioned and clean. So yes, the Dubai metro will be a talking point, but I can’t see someone coming to Dubai and not Sharm Al Sheikh because we have the metro here,’ said John Podaras, an associate director at TRI Hospitality.

‘But on the other hand it adds to the infrastructure and tourism inventory, so it will obviously help. It adds to the lustre to the city.’

With a number of hotels near metro stations in Dubai, Accor Hospitality says that the metro will be an important selling point for its business. ‘Our guests will be able to enjoy hassle-free journeys and will be able to avoid the congestion on the roads,’ said Nicola Hochgruber, Hotel Director, Suitehotel & Ibis Mall of the Emirates. ‘Two of Accor’s hotels, Novotel and the Ibis World Trade Centre are located at the metro station itself, which means guests will not have to walk outdoors to take the metro.’

Another benefit that the tourism industry will see is that the metro will help attract global conferences, as infrastructure is ‘an absolute key driver when it comes to attracting’ these events, says Rob O’Hanlon, Tourism, Hotel and Leisure partner at Deloitte in the Middle East.

‘Dubai has so many things going for it in terms of its location and its hotels, but what was missing was the ability to get people through the airport and out to the properties efficiently,’ he said. ‘The metro by itself isn’t going to attract tourists, but it’s one of the last pieces of the puzzle to ensure the offering is complete.’

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Tuesday, September 8- 2009 @ 12:21 UAE local time (GMT+4) Replication or redistribution in whole or in part is expressly prohibited without the prior written consent of Mediaquest FZ LLC.

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