Sports Business in the Persian Gulf ... a Business Week review

Business Week ran a great Sports Business feature on the new frontier for sports marketing, the Persian Gulf.



Going for the Gold in the Persian Gulf

The oil-rich states are lavishing money on big-time athletic events as a branding strategy—and perhaps a new economic engine

By any standard, Aspire Sports City in Qatar's capital, Doha, is a dazzling sight. Rising from the desert floor, gleaming buildings stand out in a desiccated industrial landscape. Inside the main edifice, a more than 300,000-sq.-ft. dome, you'll find 10 sports arenas, ranging from tracks and Olympic-size pools to a full-size soccer field. The arching, 50,000-seat Kalifa International Stadium sits next door. Soaring above it all is the steel-mesh Aspire Tower, at 1,050 feet the tallest structure in the country.

This sporting mini-metropolis—the venue for 2006's Asian Games—is the cornerstone of Doha's bid to bring the 2016 Summer Olympics to an Arab state for the first time. With 70% of the sports infrastructure in place, 86% of the local populace behind the bid, and solid state backing for the additional $4 billion to $5 billion needed for facilities such as media and athletes' villages, Doha should make the cut on June 4, when the International Olympic Committee whittles the current seven cities down to four or five. The final decision will be made on Oct. 2, 2009. "We are carrying the Arab world behind us," says Hassan Ali Bin Ali, chairman of Doha's bid committee.

PILES OF CASH
But Doha's Olympic bid is far from the only Persian Gulf foray into big-time sports. Some 250 miles away in Dubai, a 25,000-seat cricket stadium is taking shape at the heart of Dubai Sports City, a 50 million-sq.-ft., $8 billion development in the desert that by 2010 will include stadiums of every variety, training academies, a mega-mall, hotels, and residences. Down the road, Abu Dhabi is busy readying the largest permanent Formula One circuit in a development that could cost $1 billion, insiders say. New projects and events in golf, tennis, horse racing, motorcycle racing, and rugby are sprouting like cacti.

It's all part of an effort by the Gulf to raise its profile through sports. "What is the fastest way to get your name out as a brand?" asks Samer Al Shaikh, marketing manager for the Bahrain International Circuit, which hosts its fifth year of Grand Prix racing on Apr. 6. "By showcasing your tiny country to hundreds of millions of viewers around the globe."

And with the region flooded with billions of petrodollars, the normal metrics don't apply. While American and European cities struggle to cobble together financing for facilities, the Gulf's leaders have piles of cash and are happy to spend it on athletics—think of it as sovereign sports funds. Abdul Rahman Falaknaz, a key developer behind Dubai Sports City, recalls the September, 2003, meeting when he pitched the idea to Dubai's ruler, Sheik Mohammed Bin Rashid al-Maktoum. After just two questions about the cost and the timing, Sheik Mohammed turned to an aide and thundered: "Do it."

The region's rulers recognize the importance of star power. Tiger Woods bagged $420,000 for winning the 2008 Dubai Desert Classic, and his agent, Mark Steinberg, declines to confirm or deny news reports that Woods got $3 million in appearance fees. At tennis tourneys in Qatar and Dubai this year, Maria Sharapova and Roger Federer knew they would exit six or seven figures richer, win or lose. (Sharapova won, Federer didn't.) Top golfers Ernie Els and Woods are building courses, and soccer power Manchester United has inked a deal to run a training school.

The payoff may be a new economic engine for the United Arab Emirates and its neighbors when the crude runs dry. That transformation is especially urgent for Dubai. Unlike Abu Dhabi, which sits on 10% of the world's proven oil reserves, or natural-gas-rich Qatar, Dubai is within a few decades of exhausting its oil. A diversification strategy over the past 20 years has helped Dubai trim the share of oil and gas revenues in its economy to just 6%. Tourism, by contrast, accounts for about a third. "The vision is to bring sports to Dubai," says Abdullah bin Suwaidan, deputy director of Dubai's Tourism Dept. "We are not depending on oil."

Companies near and far have smelled the opportunity. Emirates Airlines has seen its global sports marketing budget mushroom from $6 million in 1999 to $100 million in 2008, says Boutros Boutros, who oversees sponsorships for the carrier. Dubai Duty Free has been upping its sports sponsorship for years and in 2007 spent about $17 million on tennis, golf, and horse racing. This year, British bank Barclays (BCS) plunked down $9 million to become title sponsor of the renamed Barclays Dubai Duty Free Championships in tennis through 2010, its biggest such deal in the region. Other Western companies that have jumped in include watchmaker Omega and CNN, both co-sponsors of the Dubai Desert Classic golf tourney since 2004.

The Gulf sports push got its first boost in 1989, when the PGA European Tour initiated the Dubai Desert Classic. Four years later tennis' ATP Tour held its first Gulf event in Doha. In 1996, Sheik Mohammed inaugurated the Dubai World Cup, a Thoroughbred race that has become the world's richest, with a $6 million purse. This year's event will be run on Mar. 29 and features the 2007 Horse of the Year, Curlin. It will be broadcast in the U.S. on ESPN360, the network's broadband service. And in 2004, Formula One racing kingpin Bernie Ecclestone chose Bahrain and its $150 million Grand Prix track for F1 expansion.

Now there's a gusher of events spouting in the region. For the next three years the Sony Ericsson WTA Tour will hold the women's tennis yearend championships in Doha, after Qatari officials forked over $42 million to unseat Madrid as host city. F1 will add a second Mideast location next year with an event in Abu Dhabi. Dubai will also play host to the prestigious 2009 Rugby World Cup Sevens competition, last staged in Hong Kong in 2005.

PROFITS NOT NECESSARY
The money being poured into events and mega-sports centers like Dubai Sports City is all the more remarkable when you consider their backers may never see a penny in profits. Attendance at the Dubai Desert Classic golf tourney in 2008 was a modest 61,964. At the men's and women's tennis events in February, even the relatively small stadium was often half-empty. Sinead El Sibai, who oversees advertising for Dubai Duty Free, says the tournaments are not "run as moneymakers." Instead, she says, "the exposure generated by the tournaments is an investment in our brand and in the promotion of Dubai."