Lessons in branding from the UAE
This article has been cross posted with Wharton@Knowledge.
Tucked away in the northernmost part of the United Arab Emirates (UAE), Ras al-Khaimah (RAK) has a population of only 231,000. Locals account for just about one-third of this figure, which means that the sheikhdom is run largely by foreign labor and talent. The Emirate doesn’t have any oil resources, so it cannot become a magnet for jobseekers to the level of, say, Saudi Arabia. Some other Emirates have registered themselves on the world stage as unique entities — Dubai, for instance, has become known as a financial center. Now RAK is looking to find differentiators of its own.
“RAK has its own uniqueness,” hereditary ruler Sheikh Saud bin Saqr Al Qasimi said in an interview with Bloomberg Businessweek recently. “If we talk about geography, RAK has unique beaches, sand dunes and mountains. It has also a unique rich history and archeology.”
His comments indicate that the sheikhdom will seek to capitalize on its potential to become a destination for tourists. Indeed, that is where much of the attention is currently being focused. In addition, officials are hoping to market the sheikhdom’s free trade zone (FTZ) and its educational opportunities. But is that enough? “The biggest concern I have about RAK’s efforts [at nation branding] is that the Emirate will find it hard to differentiate itself from Dubai and the others,” says Wharton marketing professor David Reibstein. “I believe to be successful they will have to try to approach it by being unique, and tourism, FTZs and education are anything but unique.”
‘A Full Package Experience’
That’s not the view from the Emirate itself, however. “RAK is the only Emirate to combine sea, sand and mountain ranges,” says RAK Tourism Development Authority (RAKTDA) director Khalid Motik. “Our tourism offering plays to that strength and pairs it with premium hotels and resorts — attracting tourists who are looking for a holiday that can provide both outdoor adventure and luxurious relaxation. So we really offer a full package experience.”
The jury is still out on RAK’s nation-branding efforts, but everyone agrees it’s early days yet. The free trade zone dates back to 2000, but it was not running in high gear until a few years later. The RAK Investment Authority was formed in 2005. RAKTDA was established in May 2011. And the RAK Hospitality Group, which facilitates new hospitality projects and restaurant brands, was launched in November 2011.
The government is investing $500 million in tourism development projects, which include bringing the Emirate’s total hotel and resort room inventory to 10,000 by 2016. The investment is complemented by global hotel chains that are setting up expensive properties in RAK.
Spearheading the Emirate’s claim to uniqueness is the $1.8 billion, 657-key Rixos Bab Al Bahr Resort. The first hotels on this man-made island project will open for guests in 2014. “RAK is fast becoming a strong contender in the global hospitality market,” Motik notes. The number of visitors to RAK in the period from January to September 2013 was 815,620. Those visitors brought in revenue of more than US$100 million. Tourism accounts for about 6% of the Emirate’s GDP, and the target is to raise it to 9% after the current initiatives get underway.
RAKTDA has a two-pronged growth strategy: The first aim, of course, is to attract more tourists. The second is to lure more foreign investment in hospitality properties.
A Thirst for Education
The government is also hoping to build its education sector through overseas investment, specifically by enticing foreign universities to open campuses in RAK. Officials say they are currently negotiating with colleges in the U.S.; in the meantime, the Manchester (U.K.) based University of Bolton opened a location there in 2008 and currently has 50 faculty and more than 300 students.
“Most Emirates are aiming to provide the same branding,” says Zubair Hanslot, provost of the off-campus division at the University of Bolton. “However, RAK has an advantage in that it is not overpopulated. It also has some very good places for tourism. When you want to seriously study a subject, it is far better to be in an environment that offers you space to think and the tranquility for inspiration. RAK has these qualities, but it also has modern urban areas to connect and network with people.”
According to Hanslot, Bolton decided against opening a campus in Dubai because it was already overcrowded both in terms of people and educational institutions. “Many higher educational institutions in Dubai offer education from office blocks and that is not a good experience,” Hanslot notes, adding that Bolton has plans to extend its reach to some of the smaller Emirates.
“The UAE is indeed often viewed as a single entity from outside,” says Anthony Ayoola, dean of the American University of RAK (AURAK) business school. “Close up, there are differentiating characteristics — the lower cost of living; the industry and thirst for education of the local Emirati populace; the more genteel pace of life; cultural diversity in the workplace, and the unique physical environment juxtaposing desert, mountains and sea. These will help in creating the RAK brand. The continuing emphasis on growing RAK’s educational base is designed to work in [tandem] with the developmental trend in the area.”
Not all observers share his confidence in RAK’s ability to differentiate itself, however. “The structure of RAK’s education sector is largely identical to those of the other Emirates,” according to a policy paper by the Sheikh Saud bin Saqr Al Qasimi Foundation.
But officials have no plans to abandon education as a focus. The foundation points out that the percentage of federal funds devoted to education in the UAE is much higher than that of many developing and developed countries. Some 22% of the 2013 national budget was allocated to education. “Education is the key to empowering our young generation,” said Saud in the interview with Bloomberg Businessweek. “There is a huge correlation between education and economic growth.”
Economic growth is also being addressed. Although RAK has no oil resources, it has other natural resources. RAK is the largest cement producer in the UAE. The $1 billion RAK Ceramics is the world’s largest manufacturer of ceramic and porcelain tiles. Other industry sectors include pharmaceuticals and gas. In 2012, RAK signed a deal with Zuari Agro of India to set up a fertilizer plant. “RAK has developed several industries that include cement and ceramics,” Peter Fort, CEO of the free trade zone there, told Knowledge@Wharton. “RAK Ports is an important revenue earner for us. We are also trying to develop the tourism industry in a big way.”
Meanwhile, RAK’s free trade zone is one of the fastest-growing in the region. It is made up of a business park free zone, an industrial park free zone and a technology park free zone.
“The FTZ was formed by royal decree, and the initial investment was provided by the government,” says Fort. “But we are completely debt-free now and are self-sustaining. We are investing in supporting infrastructure, and we also have a cost advantage…. Living costs in RAK are at least 30% cheaper than, say, Dubai.” The other business-friendly measures RAK is offering include 100% foreign ownership, zero corporate tax and the freedom to repatriate profits. “There is absolutely no red tape,” Fort notes.
UAE, or RAK?
For all RAK’s efforts, the nation-branding exercise has not been an immediate success, critics say. FutureBrand, which produces a country brand index, puts the UAE at No 23 on its list; individual Emirates get no mention. But FutureBrand has also placed the UAE as the number-one brand of the future. “To achieve its goal of being a model country in the future, the UAE is actively investing in its own commercial and tourism ecosystems,” according to the 2012-2013 FutureBrand report.
Could size be a factor hindering RAK? The Emirate is only 1,684 square kilometers, a small fraction of Abu Dhabi’s 67,340 square kilometers. “Obviously, with greater size it is possible get greater recognition,” says Reibstein. “But there are clear examples of locations that have gained visibility and created their own brand with very few citizens and very little geographic space. Monte Carlo, Las Vegas and the Vatican have all developed very clear brands with minimal [population sizes]. They did this by creating some identity that was very distinguishing, or differentiated. Closer to home is Dubai. That is not large either, but it has been able to create global recognition.”
Motik has a different way of looking at things. “We do not set up RAK in competition with our neighboring Emirates,” he notes. “We see each Emirate offering different and complementary experiences — so that the visitors will enjoy a complete UAE travel experience.”