Posts Tagged ‘Social Impact’

Abu Dhabi Chamber of Commerce and Industry (ADCCI) recently sat down with Wes Schwalje, COO of Tahseen Consulting, to discuss the United Arab Emirates’ plan to become a regional and global themed entertainment destination with its sizable investments in theme parks.

ADCCI: What value do theme parks bring to the UAE’s tourist proposition?

Schwalje: In 2016 the World Travel and Tourism Council estimated travel and tourism contributed approximately $227 billion to Arab economies and employed approximately 6 million people. This means that the contribution of the travel and tourism sector to regional gross domestic product is on par with the banking, chemicals, agriculture, and automotive sectors. It is clear that travel and tourism will play a strong role in generating economic growth and employment in the Arab World over the next decade.

In the UAE, travel and tourism has been identified as a key sector for economic growth and diversification. According to the World Travel and Tourism Council, in 2016, travel and tourism contributed $43 billion to the UAE economy. For this reason, the UAE has invested significantly in the travel and tourism sector to position itself as a destination of choice for international leisure and business travelers. The UAE’s more recent investments in theme parks complement the country’s already significant legacy investments in world class resorts, hotels, golf courses, and other attractions. Theme parks fill an existing gap in the types of visitor attractions the UAE offers. The UAE is world-renowned for its beaches and adventure tourism given its unique ecosystem. Over the last decade, it has launched a number or sporting, culture, shopping, and festivals which have been effective tourist draws. Heritage tourism has received a lot of investment in the run up to Expo 2020. Theme parks serve as an additional strategic lever in the UAE’s competitive strategy to attract tourists. However, it should not be ignored that some studies have shown that typically, residents from within 1.5 to 2 hours of a theme park, can account for as much as 80% of theme park visitors.

ADCCI: What kind of traveler will theme parks attract?

Schwalje: The business proposition of UAE theme park investments is rooted in the oft cited statistics that 6 billion people live within eight hours flying time to the UAE and Dubai and Abu Dhabi airport passenger traffic collectively amounts to approximately 100 million people. The idea is to convert these travelers into theme park guests. Based on the top source markets for UAE visitors, theme parks are likely to attract travelers from India, Saudi Arabia, United Kingdom, Oman, Pakistan, US, China, Iran, Germany, and Kuwait. However, it remains unclear how the UAE theme park might ultimately evolve. For example, key theme park clusters in Florida and California in the United States have carved out a niche which attracts visitors that are ready to travel long distances and stay in parks for long periods. In Florida, for example, overseas visitors have an average length of stay just above 10 days. In the UAE, the average length of visitor stay is approximately 4 days. So it is unclear if the UAE theme park market will evolve similar to the model of California and Florida or if it will evolve more closely to European or Asian theme park markets which often have considerably shorter lengths of stay and cater largely to more proximal geographic markets.

ADCCI: What kind of peripheral spends will these travelers bring?

Schwalje: Based on visitor spending trends globally, in addition to direct tourist spending on accommodation, transport, and entertainment, theme park tourists will also bring significant spending on shopping, sightseeing, dining, and other recreational activities. The indirect and induced spending impacts from tourism can be as significant as or higher than the direct contribution of travel and tourism to GDP. This implies that extending visitors’ length of stay should be a key priority for UAE tourism promotion authorities and key stakeholders.

ADCCI: How should the UAE optimize theme park segmentation? What types of parks work best?

Schwalje: To maximize revenues, UAE theme parks will need to quickly transition from selling 7-hour experiences to a 7-10 day experience. This will require doubling the average length of visitor stay in the UAE. While a large scale critical mass of theme parks and attraction is critical, a key challenge will be encouraging overnight stays by increasing suitable accommodation across all market segments.

ADCCI: Do ‘internationally branded’ parks, such as Legoland, offer more value and footfall?

Schwalje: Theme parks generally have two broad strategies for attracting customers: leveraging original local content or global alliances. In the UAE, theme parks have generally chosen the strategy of forming global alliances for intellectual property assets to make their parks appeal to a broader international audience. Empirical studies of the impact of park theming surprisingly show that theming is not particularly significant in driving entry prices and attendance – attractions seem far more important. So there is not conclusive evidence that international branding is a golden ticket to success. However, consumers are becoming more globally aware, and other rapidly developing competing theme park markets, such as China which opened more than 20 theme parks in the past few years, have followed a similar international branding approach to UAE theme parks.

ADCCI: What might theme parks of the future look like?

Schwalje: The theme park industry, like other industries, evolves based on economic conditions, global competition, socio-political developments, and technological developments. An interesting study conducted recently asked over 100 theme park leaders about their views on the future of the theme park industry. A few of the themes that emerged from this study were: top future themes for parks will be interactive adventure, fantasy and mystery, movies and TV shows, science fiction, and space; the family market will always be the target market for parks; operational excellence, such as reduced wait times and dynamic pricing, will become key points of future differentiation; visitors will demand more interactive, personalized experiences; and theme parks will have to offer integrated vacation experiences that include on-property accommodations, food services, recreation, shopping, recreational and entertainment activities, and other tourist services. We see many of these themes playing out now.

When it comes to news on socio-economic trends in the Arab World, government and business leaders turn to Trends Magazine. Tahseen Consulting is honored to have its insights on emerging trends in Arab philanthropy featured in the publication’s September issue.

Tahseen Consulting’s Chief Operating Officer, Wes Schwalje, spoke with Nikhil Inamdar, a leading voice on key business trends in the region, regarding the region’s transition from charity to strategic philanthropy. In a wide-ranging discussion, Schwalje discusses recently launched large scale philanthropic initiatives, emerging trends in strategic philanthropy, and what the future holds for Arab philanthropy.

Tahseen Consulting's insights on emerging trends in Arab philanthropy are featured in Trends Magazine's September issue

Tahseen Consulting’s insights on emerging trends in Arab philanthropy are featured in Trends Magazine’s September issue.

Nikhil Inamdar: What are the latest trends being witnessed in Arab philanthropy?

Schwalje: The three most transformative trends I see now are as follows:

High Net Worth Individuals Are Playing an Increasing Role: In 2010, Berkshire Hathaway CEO Warren Buffet and Microsoft co-founder Bill Gates established the Giving Pledge to persuade American billionaires to donate at least half their wealth to philanthropy or charitable causes either during their lifetime or after their death. This initiative has since been broadened to include philanthropists globally. In 2012, Tahseen Consulting conducted a study in which we looked at the potential impact of Arab billionaires signing the giving pledge. At the time, we estimated that $24 billion could be mobilized if Arab billionaires signed a pledge to donate their wealth to philanthropy. While many high net worth individuals have a strong tradition of giving informally, we are witnessing more wealthy Arab individuals making large scale philanthropic contributions transparently and publicly. Their motivations are no different from philanthropists in other parts of the world – wanting to give back to those less fortunate, gaining public recognition and social capital, establishing a legacy, and playing a greater role in shaping their country’s or region’s future. The $1.1 billion donation of Abdullah Ahmad Al Ghurair to capitalize a private foundation and Prince Al Waleed bin Talal’s pledge to direct most of his $32 billion in wealth to philanthropy, we are potentially witnessing a new phase of Arab philanthropy. We are likely to see several more of the Arab World’s approximately 36 or so billionaires making sizable pledge to philanthropic initiatives to strategically manage their wealth for the greater good.

The Transition from Charity to Strategic Philanthropy: In the past, charity in the Arab World was motivated by individual, unpublicized initiatives to give back to local communities. Giving was often focused on societal issues affecting local communities like poverty, housing, and heath care. Arab philanthropy historically has been individually motivated acts of kindness that did not typically address the root cause of societal issues. In the late 2000s, we witnessed a significant push in the region to institutionalize charity, philanthropy, and corporate social responsibility to make philanthropic efforts more strategic. This push towards philanthropic investment and strategic philanthropy remains rooted in the region’s religious traditions of Zakat and Waqf. In the early 2000s, many philanthropic efforts could still be characterized as donations to fund program execution by nonprofits. Philanthropists were primarily concerned about programmatic execution commensurate with the size of their donation with little regard for measuring impact and enhancing institutional capacity. A pivotal watershed occurred in 2007 when Sheikh Mohammed donated $10 billion to endow his namesake foundation the Mohammed bin Rashid Al Maktoum Foundation. The scope of this philanthropic gesture catalyzed a number of dialogues in the region about strategic philanthropy. The late 2000s saw the emergence of a number of endowed foundations in the region that began investing resources into nonprofit enterprises in order to increase their capacity to address the root causes of regional development challenges. By 2015, a number of the initiatives launched in the early 2000s and earlier have adopted strategic approaches to philanthropy which involve building internal capacities to deliver programs, developing the institutional capacities of nonprofit partners and grant recipients, pursuing programs with well thought out approaches that address the root causes of development issues, and strong systems of monitoring and evaluation to measure impact and value for money.

Arab Philanthropy is Playing an Increasingly Important Role in Global Development: Many of the region’s philanthropic institutions have become involved in international development and engage regularly with multilateral institutions and bilateral donors. Increasingly large Arab philanthropic initiatives have been able to shape the policies of multilaterals and bilateral institutions through their funding, provide input on program design and development, and contribute funding for scaling up successful initiatives.

Nikhil Inamdar: What distinguishes Arab philanthropy from global philanthropy?

Schwalje: In addition to the relationship between philanthropic giving and religious traditions, a unique aspect of philanthropy in some of the Arab countries is the emergence of hybrid foundations which are funded by government or quasi-governmental funds and private donors. In other regions, public charities generally receive their funding from the public through grants from individuals, government, and private foundations, while private foundation generally receive funds from a single source, such as an individual, family, or corporation. In this respect, the definition of what constitutes a charitable organization and to whom it should be held accountable is not as clear cut as elsewhere. Adding to this confusion is the fact that many of the region’s philanthropists wear multiple hats in business and government.

Nikhil Inamdar: What will need to happen in terms of regulation etc. for this segment to mature like the way it has in Western economies like the US?

Schwalje: In many Arab countries, civil society laws make the registering of philanthropic organizations immensely difficult and can preclude fund raising. Such laws have the potential to negatively influence the development of civil society. Laws which might also serve to motivate individual giving and corporate philanthropy, such as tax deductible charitable giving, are also lacking. Emerging forms of philanthropy, such as venture philanthropy and crowdfunding, currently exist in regulatory grey areas which require regulation to ensure they can thrive in the region.

Nikhil Inamdar: Does philanthropy need to become more organized in terms of impact assessment, audit etc. so as to give the sector a more formal structure?

Schwalje: Several elements are required to Advance Arab Philanthropy:

Mapping Giving Patterns: More effort is needed to map philanthropic giving to determine what entities are giving and to whom in order to identify unmet needs. An interesting initial attempt to map private philanthropic contributions is the UAE’s Annual Foreign Aid Reports which included information on giving by many of the UAE’s philanthropic organizations. More information on giving patterns with promote coordination and reduce overlap of efforts.

A Focus on Improving Delivery Capabilities of Beneficiaries Linked to Funding: In many cases, regional nonprofits lack the capabilities and internal controls to absorb and manage large-scale donor contributions. This has promoted a tendency of Arab philanthropists to work with international organizations over home-grown Arab institutions. Capacity strengthening of Arab donor recipients linked to philanthropic contributions will be required to strengthen the region’s civils society institutions to deliver more effectively on large-scale initiatives and attract larger philanthropic donations.

Improved Capabilities to Analyze Value for Money: Because of the youth of strategic philanthropy in the region, there are several organizational capabilities that philanthropic organizations need to improve. This includes identifying program objectives to determine the strategic intent and envisioned impact of initiatives, examining the ongoing relevance and validity of programs, ensuring efficiency and economy of activities, and assessing the impact of programming.