A Hotel That Costs $80... Just to Get into the Lobby
By Graham Summers
April 11, 2007

Oil is transforming the desert.

As the largest exporters of oil in the world, the Persian Gulf states value oil differently than the West. To the average American, oil and oil prices are a daily nuisance, a volatile cost of living that eats away at income.

For the Gulf States, oil is the economy.

Since 2000, the price of oil has more than doubled. The Gulf Cooperation Council (GCC) – Bahrain, Qatar, Kuwait, Saudi Arabia, and the United Arab Emirates – have ridden this boon to unprecedented levels of wealth.

The GCC now has a cumulative trade surplus of $560 billion. Semi-desert countries such as Saudi Arabia and the United Arab Emirates (UAE) now rival more industrial nations such as Switzerland and Germany in per-capita GDP.

It's the third boom the region has felt in the last 30 years. The Gulf States manufactured similar good fortunes when they cut production and raised prices during the oil crises in the 1970s and early '80s. However, both booms were short-lived, with oil falling back to $10 a barrel in less than five years as the Soviet Union kicked up production and exports to capitalize on Western demand.

These fluctuations created a roller-coaster effect for Gulf State economies. Rapid GDP growth and trade surpluses vanished as quickly as they came. As reliant as the U.S. economy is on oil, the effect of crude prices domestically pales compared to the havoc volatility wreaks on oil producing countries.

In an attempt to stabilize the situation, the Gulf States (except Iran, Iraq, and Yemen) formed the Gulf Cooperation Council (GCC) in 1981. The situation is loosely comparable to the European Union in that other countries can seek membership – Yemen is currently in such negotiations – and the GCC will use a single currency: The khaleeji will enter circulation in 2010.

However, the most important development for the GCC was its decision to diversify its economies away from oil. During the previous two oil booms, Gulf States plunged their excess cash into foreign investments. This time around, the GCC is investing internally in infrastructure.

Nowhere is this development more apparent than the Emirate of Dubai.

In 1993, Dubai was an arid desert broken by a single strip of office buildings along a four-lane highway. Less than 15 years later, you can't even see the desert for the urban sprawl. What was sand and scrub brush is now covered by – paved roads and public parks.

The Burj Al-Arab hotel, opened in 2003, is the only seven-star hotel in the world. The hotel stands on an artificial island 900 feet from the shore. Construction of the island required 250 piles of concrete to be embedded 40 meters into the seabed.

The hotel stands over 1,000 feet tall – taller than the Eiffel Tower – making it the tallest hotel in the world. Merely entering the lobby costs $80, regardless of whether or not you plan to stay.

The rooms range from 1,800 square feet to 8,360 square feet in size. Room rates run from $1,000 to $10,000 a night.

The hotel features an outdoor tennis court located on a giant disc extended from the 25th floor. For dining, you can enjoy a three-minute submarine ride from the lobby to the Al Mahara seafood restaurant, located on the seafloor. Other dining options include the Al Muntaha, located 200 meters above ground.

Building the hotel required 700,000 cubic feet of concrete and 9,000 tons of steel. More than 30 different types of marble were used within the hotel. Altogether over 240,000 square feet of marble were used. And 85,000 square feet of 22-karat gold leaf was used on the hotel's interior.

International infrastructure companies are piling into the region. A lot of large contracts are being signed. I'll detail one such contract here in the next week.

Until then…

Good trading,

Graham