Strategy…honestly?
So China doesn’t want to rattle the US, but Obama believes their relationship will “shape the 21st century” – shaping is not necessarily a good thing, when’s the last time you had warm feeling towards a relative telling you to “shape-up” – okay, that may be reading between the lines a little too much, granted, but in the current environment and still early-stages of the new relationship being forged between these two major powers - on very different paths-of-fortune - every single utterance is to be scrutinised in order to search for a betrayal of true emotion. A composed master of speech like Obama does make this slightly more difficult, but someone will slip up somewhere, just a matter of time. As discussed last week, dialogue is focused on the all-important currency question, what to do with the vast reserves and some more worrying developments with China business practices in the face of some recent and concerning “negotiations” and eventual conclusions - which seemed to heavily favour the Chinese portion of a joint-venture, every time.
The other important discussions taking place today are in Israel and concern the sensitive issue of settlement expansion in those areas considered Palestinian territory by the international community. The bargaining chip that the Israelis have created for themselves stands in the way of the start of a proper road to peace – US special envoy George Mitchell is gearing himself up for what will no doubt be a tense discussion, but nothing good has ever come from ignoring the major issues. Watch this space and we’ll analyse the consequences/fall-out of whatever happens. During all of this diplomatic shuffling, and in the absence of further visible volatility in Iran’s political spectrum, the price of Oil has maintained its holding position around the $70/brl level, awaiting further indicators of growth and consumption before either breaking through to the delight of oil-producing nations, or retreating to the cheers of US motorists.
Salad counters….and counting salads (aka Fattoush-Index)
Following a recent trip to Lebanon’s capital, Beirut, and in similar vein to both the Big Mac Index and Soft-Shell-Crab-Index, I wanted to briefly explore the prices charged (equalised in USD$s) for the simplest of Lebanese dishes, served all around the Middle East - a salad dish known as Fattoush – made of no-fuss, (normally) fresh ingredients. The usual occurred of course, the cheapest (and best tasting, I can assure you) was to be found in Beirut itself, costing an average (calculated across a range of low-to-high-class establishments) of only $3.00. Other parts of the Levant, including Jordan, Syria and Egypt (I did not manage to get through to an eatery in Tel Aviv sadly, but I’m assured there’s great love for the dish there too), averaged $3.20-$3.30. Iraq comes in at $3.60.
Then we move to the Gulf. The average across the GCC after some quick calculations, and despite a tendency for most Lebanese restaurants to be found in hotels, was a surprisingly affordable $3.80 - to put into context, that’s “affordable” when compared to London where we’re talking about $8 at even the ever-popular-nothing-more-than-a-Lebanese-McDonald’s-late-night destination that Maroush is) – but then I took a look at Dubai in an isolated environment, and the cheapest (and not particularly pleasant tasting) portion of Fattoush I could find was $3.50. Not bad. However, the average across 5 well-known and highly visited Lebanese restaurants (both located in a hotel and stand-alone) was $6! That’s a 100% premium to the average cost in Lebanon. Dubai’s average cost is still at a 30% premium to the home-of-Lebanese-cuisine.
How does the Fattoush-index provide any interesting insight to the economic future of the Middle East? Well, a news report today announced that inflation rates in the UAE have actually turned negative for the first time since 1990 – now that’s a huge change to the pace of growth and so-called bumper-development through the last 20yrs, no doubt fuelled by Dubai’s success in attracting ex-pats since then. Excellent news, now finally prices that have been living-in-a-dream, that’s to say those authorities, business owners and especially restaurateurs whom have been living-in-a-dream concerning the prices they charge for the service they provide, no longer have an inferior-fattoush-chopped-tomato to stand-on.
Will Dubai adjust to the reality that has stared it in the face since the end-of-2008 and become a truly affordable and decent living environment? Many agree that the good work done in the last year with improving infrastructure and generally “cleaning” the place up has been rendered useless by the relentless overpricing that has continued. The absence of inflation rids one of the most enduring excuses that have propped-up prices.
Diaspora-tastic…
The question still remains as to why the tourist friendly destination that Dubai is, is so much more expensive than a truly-natural destination like Beirut? Despite having a far greater number of year-round tourists, Dubai insists on squeezing every penny out of the visitors. Problem is, they also squeeze every penny out of those living here. The numbers just don’t add up. Sure, Dubai has a constant stream of relatively well-off Europeans (mainly Brits) searching for that elusive ray of sunshine, but Lebanon’s Diaspora is large enough and sustaining to a suitable level to normalise the numbers.
A recent trip to Lebanon got me thinking, just exactly how large a population does it take to sustain an economy totally dependent on tourism and services, and how much must an average “visitor” spend during their stay to ensure a profitable conclusion for the host nation? Despite the number of (cavernous) hotels Dubai has (over 450 now) offering the opportunity for foreigners to travel to and remain in for-a-week-or-so, it would seem that for 3 months of the year, the tiny country of Lebanon is capable of even outshining the so-called “world’s-best” tourist destination – the reason? Again, that ever-dependent Diaspora.
Cavernous v Boutique
At its peak, Dubai has had 6 million hotel guests stay in over 450 cavernous hotels. Lebanon’s population is normally 3.5m, but bloats to an incredibly vibrant and crowded 7.5m during the summer months of June, July and August. This includes at least 300,000 visitors from the Gulf at any one time during this period (whom the Lebanese greatly appreciate for spending their time and, errrm, money), all residing in the less than 300 hotels found throughout the country – and many of these hotels offer only 1/5 the number of rooms of an average Dubai monstrosity. Lebanon is dramatically underserved by decent, good-quality hotels – it focuses more on the higher-end boutique styles found in other Mediterranean countries. Dubai is in contrast experiencing an over-supply of ever larger, and if you believe the stories ever more inferior-quality Vegas-style accommodation.
So the main difference must be attributed to the permanent population numbers right? Well, Lebanon’s 3.5m versus Dubai’s (estimated) 1m certainly helps. Dubai simply does not have enough volume to generate the revenue required to keep the city growing at its desired pace. However, it really must be Lebanon’s Diaspora. A doubling of a country’s population on an extended summer holiday for almost three-months of the year does wonders for the service industry across all levels, and provides enough revenue for business owners to see through the rest-of-the-year. Hence they do not need to increase prices for the high-level of service they provide. The Diaspora can afford it, and the premium they may pay in the hotel for that portion of Fattoush is essentially subsidising the local eatery’s bargain portion of equally-high-quality around the corner.
So what should Dubai do? Simple - lower prices to attract more people. Oh yeah, and how about maybe improving the quality a little.
Expensive storage…
Oh boy, that sales-force again. Readers of the last set of observations relayed from Lebanon a few months back will recollect the efficacious sales-force at the inimitable duty-free-cigar-section of Beirut airport – a great amplifier no doubt in the consumption of cigars, influenced by certain “persuasive” factors. You’ll be glad to know that this occasion presented a more resolved state-of-mind, successfully avoiding the purchase of an unnecessary supply of glorious Cuban-sticks-of-mouth-ulcers – so instead I “allowed” myself to be persuaded into buying a humidor. That’s right, a “much needed” humidor. Funnily enough, uhhmmm, a much (much) larger and more expensive humidor than the one I had never-even-originally-intended-on-purchasing – but required to house all those extra supplies.
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