The strange case of Real Madrid Resort Island, Ras Al Khaimah and “sportatainment”

A billion dollar Real Madrid themed resort – initially planned for Ras Al Khaimah but scrapped last year – could well be back on and shifted to the UAE capital, with The National Bank of Abu Dhabi confirmed as a the Galacticos’ newest partner. With that in mind, we’ve dug out out Esquire’s 2012 piece on the audacious proposal, detailing what it could mean for all involved.

Is it 2007 again? Perhaps in Ras Al Khaimah it is, following the launch of the $1 billion Real Madrid Resort on the reclaimed sands of Al Marjan Island, a mega-project reminiscent of Dubai’s real estate boom.

RAK hopes the Madrid-themed resort, with hotels, beaches, a stadium, museum and marina, will transform its tourism industry. Real Madrid hope it will bring in much-needed cash from fans in Asia and the Middle East. It’s a bold move, but is it a wise one? Although the number of tourists to the region has increased, these are still financially uncertain times and a raft of other huge real estate projects have been cancelled or postponed indefinitely (remember Chess City?). However RAK, and Real, say they have a plan…

At a launch event in a large marquee, Ras Al Khaimah’s ambitious plans to put itself on the map are being outlined. Among the dusty plots of the reclaimed Al Marjan Island site, His Highness Sheikh Saud Bin Saqr Al Qasimi, the Ruler of Ras Al Khaimah, gives an opening speech that thanks Real Madrid for “choosing Ras Al Khaimah as one of its Galácticos,” but also points toward a new future for the Emirate. “Those who want to invest are always welcome… but progress is our choice in the increasingly interconnected world we live in,” he says before quoting Franklin D. Roosevelt. “We have learned to be citizens of the world.”

Dr Khater Massaad, the CEO of Ras Al Khaimah’s sovereign wealth fund also speaks, proudly announcing that “we are the rising stars around the UAE,” he cites the $3.6 billion of investment and twenty-seven percent increase in business compared to 2010. People are investing in the emirate, increasingly so in tourism.

You’d think there was little else to entice international visitors away from Dubai and Abu Dhabi, but people are starting to come.

In November last year, as part of the push for tourism, the Ras Al Khaimah Hospitality Group was set up. One of its key aims is to have 10,000 hotel rooms by 2016 — there were 4,270 last year, up from 2,651 in 2009. On top of this, government figures show that 835,200 holiday-makers visited RAK last year – an increase of 40 percent on 2010. The top country by visitor number was (surprisingly to some) Germany with just over 300,000 followed by just over 200,000 from the UAE itself – a figure that has risen consistently since the Emirates Road cut journey times from Dubai’s airport to 45 minutes. In late 2008, one of the Al Marjan developers Rakeen (set up under the auspices of Ras Al-Khaimah’s then Crown Prince) said the number of visitors was projected to be 2.5million by 2012. The reality may be some way off that, but the trend is certainly upwards.

None of this has happened by accident. In 2008 a diplomatic cable from the U.S. consular general in Dubai (latterly released via Wikileaks) outlined the northern Emirate’s master plan: “RAK plans to become the UAE’s ‘second Dubai’. Dr. Abdul Rahman Al Naqbi, Director General of the Chamber of Commerce and Industry, said the small emirate (roughly 250,000 people) has big plans for its future. Under the forward-leaning and eclectic leadership of Crown Prince Sheikh Saud bin Saqr al Qasimi, RAK hopes to mimic Dubai’s tourist, real estate development and industrial successes — albeit with far fewer resources and Dubai itself 50 miles away.”

Seen in this context, the Real Madrid Resort is part of a wider push for tourism that is already underway. The Waldorf Astoria is set to open on Al Marjan Island in October, while the Baba Al Bahr Beach Resort is also scheduled for launch there later this year.

RAK has its selling points. Basel Abu Alrub, Managing Partner of Dubai-based tour operator UTravel, tells Esquire that the emirate offers an economical beach alternative to Dubai; a strong selling point for Russian and German beach goers looking for a break away from the city life. Compared with Dubai and Abu Dhabi it is cheaper in RAK and remaining competitive is the key.

“Current demand is price driven but this could change depending on the strategy the Emirate takes in its upcoming touristic projects,” says Alrub. “It remains very important for Real Madrid to price itself realistically. It has to be in line with the competition in and outside of RAK.”

The next question is how many more tourists RAK can attract. The Real Madrid Island resort is set to have four-hundred apartments, forty-eight villas, a five-star hotel with 450 rooms and sixty bungalows. That’s a huge vote of confidence in RAK’s future as a destination, and it echoes the “build it and they will come” approach that has so far worked for tourism in Dubai, with last year seeing the highest number of visitors on record.

“If RAK expands its airline and airport, roads, infrastructure and services, entertainment and shopping centres, cultural points of interest and its free zone area, then mega projects such as Real Madrid will not have a problem in achieving a decent occupancy rate,” Alrub explains. “The idea is that the Real Madrid Resort is not a standalone product – it is part of the bigger picture, which is the RAK touristic offering and not vice versa.”

But the question many were asking themselves as they drove out to the site for the launch, past all the desert, dust and factories of the Emirate, was why did Real Madrid choose RAK and not Dubai? Especially given that the club has an ongoing sponsorship deal with Emirates Airlines? The answer that Louis-Armand de Rouge, CEO of RAK Marjan Island, gives is an acknowledgement of Dubai as much as an endorsement of RAK. “Because of the location — it’s close to Dubai and near to four million potential customers,” he says. And, with an eye to visitors from inside the UAE, adds, “It’s good to be outside the main city – people will come here for the weekend.”

The faith in this project being a success is, according to de Rouge, not just location but largely down to the strength of the Real Madrid brand: “I don’t know any other projects combining such a world brand.” He smiles thinly when it is pointed out the Ferrari is such a brand and that Ferrari World in Abu Dhabi reduced its opening hours and last December laid off over one hundred staff. Brushing this off, he points out that, “Many of those other projects were based on real estate and speculation.”

Although this resort does have 400 apartments and forty-eight villas, it won’t be relying on selling them on for investors to get their money back and that’s only part of the plan. The resort will also include a five-star hotel with 450 rooms; a marina and sailing club; a beach resort with sixty bungalows; a twelve hectare sports-themed water park, including rollercoaster and submarine; a Real Madrid museum; sports facilities such as training pitches, swimming pools, gym and sports clinics and a ten-thousand-seater stadium for football games and cultural events.

De Rouge, however, is coy when asked where the $1 billion is coming from: “I can’t discuss how much of the money is coming from RAK, but we do want to give opportunities for investors in your region.” When pushed on the issue he explains that a “roadshow” is going to take place and then investors will be chosen at the end of June. He’s confident money will be secured.

Ras Al Khaimah’s record on major real estate projects thus far is mixed to say the least. Others have already bought into different projects on Al Marjan Island, and things have not gone well for all of them. The Blu Mirage resort and residential development project, from a developer called Pure, is one such example: 150 investors are now signed up to legal action with European law firm CMS Cameron McKenna. The firm told us, “This number has grown over the past year, showing the increasing dissatisfaction the investors feel following the developers’ repeated failure to meet milestones, and the hardship investors have been subjected to. The investors, whose complaints to the Ras Al Khaimah authorities appear to have fallen on deaf ears, see their options reduced to either bringing a Bilateral Investment Treaty Action under the Agreement between the Governments of the United Kingdom of Great Britain and Northern Ireland and the Government of the UAE for the Promotion and Protection of Investments, or finding third party funding.”

One investor (no longer part of this action so not bound by the “non disclosure” issues, but wishing to remain anonymous) tells Esquire, “The Ras al Khaimah Investment Authority (RAKIA) — the same organisation promoting the Real Madrid deal — was a direct party to the Blu Mirage escrow account and so we thought this provided comfort. Alas, through the initial legal route, we established over a year ago that the escrow was empty with nothing left to fund building. We’ve also been in contact with the RAK Investment And Development Office, but they’ve offered nothing. The developer hasn’t been in contact for over a year.”

The official Blu Mirage website states: “Blu Mirage is fullyapproved and backed by Rakeen, the official land development arm of the Ras Al Khaimah Government. In order to provide our investors with absolute financial security and peace of mind we have implemented an Escrow Account with Standard Chartered Bank so that you can invest with confidence.” But for this group of investors it hasn’t worked out like that.

“It would appear that the RAK way of dealing with investors is to ignore them,” the investor we contacted said. “We were long term investors in RAK, we were not ‘profit seekers’ and many have lost their lifetime savings.” Despite repeated calls, Paramount properties, who look after the selling and marketing for Blu Mirage, did not respond to Esquire’s requests for an update or statement. Rakeen say they haven’t been involved for over a year and RAKIA would only respond to the allegations by saying they won’t “disclose any information of the developers of Al Marjan Island to any third party”.

Real Madrid Resort IslandAlso on the island is the $800 million La Hoya Bay development. It made the news in 2009 when Frank Khoie, the property developer behind the project, was sent to prison for three years after a $15.5 million cheque to RAKIA bounced. He was released just eleven months later, but the properties are still not complete, with overall prices in the emirate having fallen thirty to forty percent since La Hoya Bay went on the market. Likewise, the $817 million Boris Becker Beach Resort & Tennis Academy that was set to open there in 2010 has not yet materialised. The marketing partners ACI told Esquire they are no longer involved and developers Middle East Vision put us onto master developers RAKIA. A representative there said they will only speak to people if they come in person to the office in RAK and prove they are already involved as an investor. However, another senior development controller at RAKIA confirmed what most know: “No activity is going on the site for this project.”

With the future of some adjacent developments still uncertain, there is added pressure on the Real Madrid Resort to be a success. Not just for RAK and the investors, but for the football club itself. It’s not known if Real Madrid are going to be investing anything or merely lending their name, but when De Rouge stresses that “there is no way this is going to indenture the future of Real Madrid,” it’s taken by many as a suggestion that Real are putting in very little (if any) of the $1 billion. Nobody would confirm or deny this.

The finances of Europe’s biggest clubs have been a contentious issue in recent years. Real Madrid are no exception. In 2001 they agreed to sell their city-centre training facilities in order to clear debts of around €150 million. The European Commission and the Spanish government looked into the property deal that was reported to have made Real Madrid €480 million and it was claimed that Madrid’s local council bought the training ground after first reclassifying the site as prime building land. EU spokesman Tilman Lueder said: “We believe there may be certain state aid elements attached to this. Madrid City Hall may have overpaid.”

It did little to dispel the conspiracy theory that the club is partly government funded, a belief that goes back to the days of General Franco who ruled from 1938 to 1973. The dictator poured resources into Real Madrid to ensure it continued to dominate any team from Barcelona, a stronghold of nationalist rebellion.

After that training ground deal, Real Madrid spent millions on their Galácticos, paid the top wages and enjoyed huge success, but by 2009 Madrid’s debt was estimated at €500 million and loans were being taken out to buy more players. Spanish savings bank Caja Madrid admitted it agreed to give Real Madrid a €76 million loan to be secured on two unnamed sources of collateral. The sources of collateral were believed to be star players Cristiano Ronaldo and Kaka and the bank would have “owned” them had Madrid defaulted on the loan. Madrid are also understood to have a similar deal with Banco Santander, where it’s been claimed the bank provided credit of €70 million. Although their debt was still €169.7 million as of June 2011 they announced a yearly net profit up 31.7 percent to €31.6 million, largely thanks to off-field deals.

Back at the launch in RAK, Real Madrid club President Florentino Perez says the resort, “fits perfectly within the global aspirations of our institution,” and insists that Real are “a reference of indestructible value”. Quite how that value is maintained is a point for debate: if they want to keep funding huge wages and the signings of top players then overseason money is needed. And it’s this region that has been targeted as a potentially big source.

“We have 300 million fans worldwide and 60 percent of those are in Asia,” De Rouge points out. “And the amount [of money] spent in the Asia Pacific represents sixty percent of middle-class tourism and leisure spending worldwide.” The challenge, then, is how to monetise that support.

As David Conn, the author of The Football Business and upcoming book Richer Than God: Man City, Football and Growing Up, explains: “The top football clubs are looking to make as much money from all areas and realised, mainly in the last decade, that the Premier League and Spanish La Liga have huge audiences in Asia. None has yet found a way, apart from the general sale of TV rights, to make much money out of that army of support.”

The closest anyone has come to success in this regard is Manchester United. Their model, which other clubs are looking at with some admiration, is to tie up many different levels of sponsorship, which they sell to companies wishing to tap into the Asian market. They also go on tours to raise awareness and drum up more support. But as Conn explains, “They have still not quite found how to make significant money from their websites, and merchandising has not generally worked.”

There is another reason why leading clubs are desperate to tap into new markets. New UEFA financial Fair Play rules stipulate that clubs have to break even by the start of the 2014/15 season. This means they are looking to generate more income from other commercial means – whatever they may be. Conn believes that the new rules could therefore exacerbate the very problem that they were set up to try and curb. “The principle of financial fair play is to dampen down the commercial excesses, but in practice the top clubs could look to ever more unlikely ideas to generate revenue — and there is something in the sporting soul of the game which many people feel is being eroded by the relentless drive to make money.”

At the launch of the Real Madrid Resort, Zinedine Zidane and Emilio Butragueño were brought along to add glamour and some link to the actual game itself, but said nothing while the men in suits took the centre stage to talk money. It was a fitting cameo for the project and indicative of the way that football is going in general — a necessary evil in order to keep putting people like Zidane in a Real Madrid shirt.

Perez, however, claims the resort will be “a symbol of pride for our fans” so we spoke to a lifelong Real Madrid fan living in the Spanish capital to assess the impact there. “We haven’t really paid too much attention to it,” says José María Álvarez from Esquire’s Spanish edition, before pointing out the bigger concern currently among the fans. “The big polemic between Real Madrid and Barcelona regarding the [supposedly biased] Spanish referees system, currently overshadows the rest. The presentation in Madrid had big coverage but was forgotten in a couple of hours.”

The Guardian’s Madrid-based La Liga correspondent Sid Lowe – who had described the project as “crass” on The Guardian’s football podcast – also told Esquire that in Spain it has “largely been ignored”. He added it was a case of, “do the publicity stuff, and then move on. It’s not really designed for Spaniards, after all.”

So will Real Madrid fans want to visit? “I can’t imagine ever wanting to go,” says Conn. “I’d rather go the Bernabeu stadium itself, that’s authentic Real Madrid.” He raises an interesting point. At the time of writing it only costs $165 more to fly from Tokyo (part of the prime middle-class Asian market being targeted) to Madrid than it does to get to Dubai. We put this point to de Rouge in an email after the launch, to which he replies that along with the extra two hours time difference, there are other issues with going to Madrid: “You still have to find a ticket as most of the seats are booked by Socios [Real season ticket holders] all year round, so it’s pretty tough to get a good seat for a big event. In Ras Al Khaimah, you’ll be closer to the field and the players. The stadium is unique: a half-moon shape that is open to the sea. Where else can you find that in the world?”

It should be pointed out that matches in the resort’s stadium will be friendlies rather than competitive games. The resort, however, is looking into holographic technology and hopes that by 2017 the Real Madrid games in Spain will be transmitted live via holograms on the pitch in RAK. De Rouge is also keen to point out other features. “You can go to the beach, access a theme park on football, and be on vacation in ideal weather conditions, a climate that you will not find all year round in Madrid. We are aiming at attracting fans and their families to a “sportainment” destination where they can enjoy some fun time together and not only attend a game. What’s your option as a father — do I go [to Madrid] just with my son who loves football, or do I take my wife and daughter to visit Madrid and be just in the city? Visitors here can enjoy a Madrid experience with streets and restaurants.”

The touristic merits of actual Madrid versus Ras Al Khaimah aside, this is a huge undertaking by those working to make it happen. On the Emirates road to RAK from Dubai, there are unfinished projects, teetering billboards and peeling signs that once showed the promise of a bright new future. The global crash of 2008 put paid to a lot of big developments and saw many investors lose money. But with the Real Madrid Resort Island this could be a return to the days of the mega-project.

“Nobody before has considered anything like the Real Madrid resort,” Conn says. “The other clubs will be watching to see if it gets off the ground, and whether it proves a success — and they will all be glad they are not the pioneers.”

It’s scheduled to open in January 2015 and they expect a million visitors in its first year — a huge target. Not succeeding would be a huge embarrassment for Real Madrid and a massive blow to the tourism ambitions of RAK. Success, however, would further sustain the ambitions of one global giant and could set one of the UAE’s less fashionable emirates on the way to being a tourist destination for people around the globe.

For Esquire Magazine