It’s happening. The real estate industry in Dubai is falling from grace. We hear of job cut after job cut, rumors of businesses shutting down, and tales of woe from those laid off by property giants. And the branch of advertising with its fortunes tied most closely to real estate over the past few years is outdoor. Until a few months ago, giant hoardings lined Sheikh Zayed Road and mupis dominated the streets of Dubai, advertising myriad real estate developments.
But those were different times; it’s all gone a bit quiet now. “It was too good to continue,” says Alex Saber, chief operating officer of Publicis Groupe Media. “The way things were going with real estate advertising in outdoor, it was going crazy and it was ridiculous.”
That’s not to say the threat of an outdoor slump wasn’t always the elephant in the room. With talk of the credit crunch affecting Dubai’s seemingly unstoppable growth, there was no doubt the real estate industry – the city’s driving force – would take a hit eventually. And those who know outdoor knew the axe wouldn’t fall too far from their business. “[The outdoor market] all depends on the property sector,” said Paul Abou Chacra, media director at Arabian Outdoor, as far back as October. “If you see that there are any problems with this sector, definitely it will go down.”
Adding that prices of outdoor advertising would drop “immediately” if the property sector were to slump, Abou Chacra explained to Communicate in an unpublished interview how closely intertwined outdoor and real estate are. “Today, if you pull out all the property advertising – and it represents 50 to 60 percent – you will have the same effect on the prices. Tomorrow the prices will go down by 50 to 60 percent. It’s like in the stock market: Regardless of what kind of company you have, if you have people who are just selling out their shares, that’s it, the prices will definitely go down.”
BYE-BYE SMALL GUYS. Prices might not have dropped dramatically yet, but business is slow. Those in the industry must be hoping this isn’t the end of outdoor. Times will be tough, says Salim Barkett, director of Kassab Media, but life will go on for those who have long-term plans in place. “Outdoor will be affected everywhere, but well-run and solid companies in out-of-home (OOH) media will continue, as there is a big opportunity for them to continue to do very well. Some companies that were opportunistic and did it for short-term profit will get out of the market, but those are small companies on the periphery of the mainstream OOH media business.”
“There is definitely still life for OOH media after the economic crunch and the real estate market recession,” Barkett continues. “Yes, we will be affected and there will be a drop in the overall turnover of business, specifically in Dubai, and in the UAE in general, as real estate developers have invested heavily over the last few years. Real estate advertising will not disappear, but there will definitely be a major drop in this category.”
Barkett insists that the damaged property market will not be the sole reason outdoor will suffer, but also maintains that out-of-home advertisers have a wide enough client base to weather the storm. “This business is a long-established one,” he says. “It has proved its effectiveness and its ability to deliver. Let’s not forget, next to digital media, OOH media is the fastest growing display media of the last 10 years. It has shown dramatic consolidation, growth and strength. So the future, I think, is not as gloomy as some people think.”
WHAT GOES UP. Pierre Pereira, CEO of another Dubai-based outdoor supplier, Ströer Concept Shoof, treads a little more cautiously. “There was always a correction on the cards, it was just a question of when it came,” he says. “It’s come now; we just have to be smart and deal with it carefully. Real estate probably accounted for more than 50 percent of outdoor companies’ budgets. Having said that, I don’t believe that the real estate market for advertising will go down to zero. It’s debatable, but we still believe that there is some spend that will cover real estate.”
“Certainly, Dubai is going to take a beating,” continues Pereira. “If I’m sounding negative, so be it; that is the case. But I think it will still deliver some kind of outdoor spend. How much remains to be seen. There will still be real estate advertisers, but not on the same scale as before. Right now, it’s a bit grey, so we need to see how it goes.”
With outdoor advertising spanning both traditional media such as billboards, mupis and lampposts, and non-traditional outdoor media such as oversized hoardings and building wraps, PGM’s Saber says everyday forms of outdoor advertising won’t feel the burn as much as more innovative options. “For traditional media, life will go on as usual, of course with an impact. On non-traditional things, I think there will be a problem,” he says. “I doubt there will be any interest from advertisers in the next few months. It’s still too expensive, and clients are trying to optimize their budgets and consolidate.
Don’t forget, outdoor is not a mainstream media for lots of clients, so it’s not a priority for them. It’s used tactically sometimes. If any clients want to go on big forms for shorter periods of time, it won’t be very cost effective. They have to absorb the cost for longer periods of time so it can make sense. So I doubt there will be much interest in big hoardings for now.”
WELCOME BACK. With real estate companies taking an enforced breather from advertising, which other companies will step up to fill in the blanks? “I think you’re going to see a shift of power,” says Pereira. “What happened earlier is that a lot of retailers couldn’t pay, so they moved to TV or radio. But now they’ll probably come back, provided the pricing works more to their numbers, so they get more value for their spend.”
Kassab Media last year won the contracts to sell space on the Dubai Metro and the emirate’s buses. Its director says he is gearing up for increased business as the year unfolds, and outdoor definitely isn’t dead. “Most major brands, whether multinational, regional or local, have used outdoor, so they will continue to use outdoor,” says Barkett. “In some cases, I have seen that certain budget cuts have taken other media off [marketing plans], but [those companies] continue to invest more in outdoor. Our mupi business is on the increase in the UAE because it’s a very cost-effective media that has worked very well, and I expect it to continue to do well this year.”
The UAE’s saving grace may come in the form of its capital city, which is quietly riding out the storm while Dubai reels from the effects of the credit crunch. For Ströer Concept Shoof, which recently won the Abu Dhabi contract for 550 bus shelters, business may be slowing, but all is not lost. Especially with such an attractive prospect. “We are in the process of finalizing that contract,” says Pereira. “Our strategy has been to look at long-term contracts. I think it’s a good thing that Abu Dhabi is next door; It’s an ace we all underestimate, because it has so much surplus that it can carry the entire UAE through. That might actually be the hinge that will help a lot of the advertising industry.”
BRACE, BRACE, BRACE. So will real estate make a comeback? Advertising industry experts say yes, at some point, but admit the upcoming year will be tricky. While it may take a few years for the industry to get back on solid ground, Barkett says he is staying optimistic. “We should not undermine the effect [of the crunch], but at the same time we should work to weather this year out,” he says. “There are also some positive indications certain clients and certain categories will continue to do well.”
Echoing IAA chairman Joe Ghossoub’s we-will-endure rallying cry (see “Don’t look down,” Communicate, Dec. 2008, page 8), Barkett says the Middle East’s outdoor trade is tough enough to take the crunch in its stride. “Life has to continue, you will never have a complete stop,” he says. “We’ve seen wars in this region, we’ve seen recessions, even though we haven’t seen or lived anything like this recession in the past 80 to 100 years, but the world will continue to turn. As we are an emerging market, the whole world will look at us for development and for better results. The nature of our region and economy are factors that make us think realistically we will be able to weather 2009, and hopefully things will pick up in 2010 and 2011 to a brighter future.”