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Tourism

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A SMALL AND MEDIUM ENTERPRISES DEVELOPMENT PERSPECTIVE OF THE

HOSPITALITY INDUSTRY
IN DUBAI

The material in this publication is copyrighted. Copying and/or transmitting portions or all of this work without permission may be violation of applicable law. Dubai SME encourages the dissemination of its work and will grant permission to reproduce portions of the work promptly. All queries should be addressed to Dubai SME at essam.disi@sme.ae (P.O. Box 66166, Tel:+971 4361 3000, www.sme.ae )

The information contained herein in the Report is confidential and part of the “Industry Cluster Studies” being done by Dun & Bradstreet for Dubai SME. No part of this document may be reproduced, copied, distributed or made available in any form whatsoever to any person without express prior written permission of Dun & Bradstreet (“D&B”).

Industry Cluster Studies: Hospitality Industry ‘Culinary Entrepreneurship’ --- the report highlights potential opportunity for culinary experts as well as Food & Beverage entrepreneurs to set-up innovative concepts (comprising food, environment & service) and brands that can be globalised / internationalized. Dubai is known for its hospitality industry upscale properties as tourism destinations and myriad cuisines prepared by renowned chefs from across the world. The cosmopolitan nature of the city is shaped by a large number of franchised brands. Although hotel properties include established local brands (like Jumeirah Group), the F&B service scenario is dominated by international chains. The lack of locally developed F&B concepts highlights the absence of culinary experts and low risk taking by food entrepreneurs. The report is a baseline study of the Hospitality Industry in Dubai. The study encompasses Hotels and F&B service outlets (Restaurants and Catering firms) with focus on businesses with greater SME orientation: F&B Service. The objective of the study is to aid business plans for new SMEs and aid decision-making for policy-makers. Industry Taxonomy and Current Status in Dubai 1(ISIC Revision 4) HOSPITALITY
I. 55 Accommodation  Provision of short-stay accommodation  ISIC and DTCM License classification
352

I. 56 Food & Beverage Service activities  Provision of complete meals for immediate consumption  ISIC and DED License classification
188

Hotel

Hotel Apartment

Cafe

4250

Restaurant

Catering Firm

290

 Oversupply situation: Although supply gap persists in budget hotels, the gap is compensated by the presence of a large number of Hotel apartments. Moreover, international budget hotel chains like Holiday Inn Express, Premier inn, Easy Hotels, etc. are making inroads in the Emirate

Inspite of a large presence of F&B establishments, opportunity exists for new and existing players to capture; • New Real Estate Developments (Dubai Sports City, proposed Dubai Land development, Commercial and residential developments) • Catering for cruise, dhow trips and Events • Industry and lifestyle trends (developing home-grown brands) • Franchise buying opportunities • DTCM’s Tourism strategy paves way for F&B service business in line with their strategy (e.g. medical / sports tourism – allows for specialized catering) Competition is likely to drive higher levels of innovation, service and quality standards

1

DTCM and Dubai Chambers 2009

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Current situation analysis of the Food & Beverage Service (restaurants, cafes, catering firms) highlights dominance of franchised brands (in quick service restaurants and casual dining outlets). The SMEfriendly business underlines opportunity for development of home-grown concepts and promoting ‘local food’ techniques and recipes. Moreover, the catering business for cruise, events, institutions and industries in Dubai presents an opportunity for culinary entrepreneurs. The F&B service industry in Dubai is ‘Vibrant’: variety of cuisines, range of options and focus on ensuring food safety. The roadmap hence is to allow development of innovative home-grown concepts that add to the vibrant F&B environment and can be exported to the world as a successful Dubai franchisee.

For entrepreneurs: Key considerations for setting-up a business and opportunities Potential Opportunities to develop ‘Home-grown brands’ based on Key Trends Cafes and Juice bars are popular and offer SME opportunity to cater to new developments • Expansion of new business hubs and residential communities is feeding the coffee culture • Competition driving cafes to offer innovative products, themes, merchandise and even vending machines • Increasing popularity of specialty coffee beverages: Bateel, Davidoff Café and luxury tea brands • Increasing Health Awareness – “meals in a glass” gaining significance Institutional Catering • Schools are beginning to see the importance of providing healthy food. Further, hospitals are providing specialised catering services for patients with varied needs. • Hotel Apartments are not allowed to own F&B outlets at their premises; hence they rely on catered food for their requirements. • Growth in number of tourists is expected to boost the market for hotel & restaurant supply (semi-finished, prepared food) business. • Further, corporate lunch box catering is on the rise in Dubai, with large number of small catering firms offering a variety of cuisines Industrial Catering • Catering business will continue to be lucrative for supply to cruise liners, desert safaris and luxury yachts • Expansion of industrial capacity will increase demand for industrial catering

Cafes

Catering

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Quick Service

Entry of new SMEs in this category will depend on creating processes which are easy to follow & replicate • Supermarkets have become a destination for the outlets • Franchise Buying - Events like Franchising Middle East offer opportunity to interact with foreign and regional franchise sellers. The changing consumer and lifestyle trends require refurbishment of existing brands based on new trends for staying ahead of competition. Some examples are; • Combining leisure & entertainment with eating-out • Multi-specialty cuisine offering Fine Dining involves heavy investment in ambience - creating an atmosphere that provides exclusivity and personalized service. As such these are either driven by Hotels themselves or wellrenowned chefs Potential opportunity to adopt franchised brands

Casual Dining

Fine Dining

Entrepreneurs can become franchisees of popular international and regional brands as a first step towards understanding the F&B business. Exhibitions, such as Franchise Middle East, provide prospects for franchisee buyers in Dubai. A large well travelled pool of nationalities in the Emirate provides a case for increased adoption of international brands.

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For Policy makers: Initiatives to create an enabling environment for SMEs to thrive. Key Issue Restaurants: Difficult for SMEs to find a location in a mall Catering: Industrial areas are not well-equipped for food catering business Restaurants & Catering: Process is complicated and unclear Restaurants: Supplier unpredictability Restaurants & Catering: Issues in staff retention Operations Root Cause • Mall Developments are not known publicly • Requirements to be in a mall are unclear for SMEs • No other area other than DIP available for Catering • Non-polluting industries clustered together with polluting industries • Licensing requirements are unclear • Frequent change in rules and regulations without notice • Suppliers prefer large players and may not offer consistent goods to a small player • Staff at QSR, Casual Dining and Catering firms are low skilled with little or no qualification in F&B/Culinary fields • Uncertainty and high cost of recruiting • Inability of SMEs to handle litigation • Lack of transparency and professionalism in registering trade names • Lack of stringent governance and monitoring in case of indisciplined employees • Sudden changes in Mall rules • Standardisation • High dependence on a single chef • Lack of understanding of franchising rules and regulations

Initial Setup

Licensing and Certification

Lack of Legal Representation for SMEs

Growth

Restaurants: Hesitation to grow

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Based on the study and its findings, the report provides possible solutions in the form of initiatives: Advocacy, Seeding and Grooming for New SMEs and Existing SMEs. Dubai SME objectives Possible Hospitality Initiatives • CATERING: Clustering of food related industries To promote clustering of food related industries (catering firms) in one location. This will ensure food safety as well as allow for adequate utility investments for the cluster.

ADVOCACY SEEDING

Advocating a pro-business environment for entrepreneurship and SME development

• Through: Policy/ Regulation changes • SME representation in Law To create a committee of lawyers at Dubai SME to help at the Federal/ Emirate level. These resolve SME related issues at lower costs. may require intervention by Create a website to offer resources, find lawyers, Government body. information on enforcing contracts, employment issues, fraud, payment terms, trademarks, service level agreements, invoicing and payment terms, claims, etc Initiatives focused on seeding home-grown innovative concepts in Dubai • Culinary Incubator (combat fear of failure) Tie-up with International Culinary Institute (ICCA) and Emirate Hospitality Academy (EHA) to provide incubator space for professional chefs as well as food lovers, to test their products. Such space can be provided for food-entrepreneurs for a trial basis (say 6 Seeding a pipeline of innovative months) after which the entrepreneur can decide to start-ups start alone. The facilities will be HACCP compliant as well as meet the commercial requirements of food • Through: Initiatives and programs service. which are directed towards SMEs by Dubai SME or with collaboration • Check-list for start-ups (to avoid common start-up mistakes) with Industry/government partners. The check-list created during research can be used as a These are focused on initial set-up tool to help new SMEs. The check-list can be used in and New SMEs. the Enterprise Start-up program of Dubai SME. Further the check-list can be uploaded as an SME tool-kit (such tool-kits can be prepared for every SME business). • Foodservice management program with ICCA, ECA A fast track program to enable entrepreneurs without any F&B background to gain understanding on HACCP and other food related issues

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Initiatives focused on promoting locally developed SMEs to grow and expand outside the Emirate (internationalization) • Grants for internationalization (Local to Global) Grants can be provided to local firms to develop their internationalization plan (consultants, manuals, processes, etc)

Grooming a pool of promising Dubaibased SMEs to be global enterprises GROOMING

• Through: Initiatives and programs • Link to existing program on Franchise Middle East Extend the program to help homegrown brands find which are directed towards SMEs by franchise partners outside the Emirate. Dubai SME or with collaboration with Industry/government partners. • Networking – to introduce successful SMEs with other These are focused on operations & entrepreneurs who can open additional outlets growth and Existing SMEs. • Group Buying Schemes This will enable small businesses to enjoy group benefits in buying inputs & equipment. E.g. group buying website, cards which allow preferential access to suppliers.

Overall, Dubai’s Hospitality industry has a positive future outlook, leading to a positive growth expectation for businesses in the industry. Adopting initiatives to address remaining challenges will lead to further enhancement of the business environment for the SMEs. However, a coordinated effort between the industry leaders, SMEs and the government will be required to adopt & execute the appropriate initiatives.

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The material in this publication is copyrighted. Copying and/or transmitting portions or all of this work without permission may be violation of applicable law. Dubai SME encourages the dissemination of its work and will grant permission to reproduce portions of the work promptly. All queries should be addressed to Dubai SME at essam.disi@sme.ae (P.O. Box 66166, Tel:+971 4361 3000, www.sme.ae )

DUBAI SME Industry Cluster Studies – Hospitality Industry

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