Are flying coach and staying at budget hotels the "new normal" for businesspeople who travel for work? If so, what does it mean for airlines, hotels and casinos still trying to recover from the economic downturn? Chris Woronka, Senior Gaming, Lodging and Leisure Analyst at Deutsche Bank Securities shares his thoughts with us on what's in store for the Travel and Leisure Industry in 2010. Will the industry once again be flying high? Or, will the prospects for a better year ahead get grounded?
Be it through optional newspaper delivery, a fee for blankets, or shuttered restaurants, travel and leisure companies have had to trim costs creatively as the recession hurt revenues and profits. The sector has recently been buoyed by expectations of recovery amid signs that business travel demand is starting to rebound. But discounted airfares and hotel rates and volatile fuel prices pose challenges to profitability. Room rates at hotels remain under pressure, while casino operators are looking to Asia to spur growth as prime U.S. destinations such as Las Vegas struggle to rebound. And airlines, which have cut jobs and reduced capacity in the past two years as the economic downturn battered demand, face new security concerns that also could slow recovery. Executives of some of the world's biggest and best-known airlines, hotel and casino companies will address these and other issues at the Reuters Travel and Leisure Summit, to be held in New York from Feb. 22-24.
MANAMA, Feb 18 (Reuters) - Dubai’s debt fiasco and real estate bubble bust pushes investors to look out for alternative assets underlying Islamic finance products – could renewable energy provide a way-out?
Predominantly, Islamic finance and investment products have been backed by infrastructure or commodities assets. But executives at the 2010 Reuters Islamic Banking and Finance Summit said product diversification was needed to cut the over-reliance on real estate in the Gulf.
“Sharia scholars are eager to support the renewable energy initiative, but the Islamic banking industry (in the Gulf) does not seem to be overly interested in this area although I am aware of a couple of deals involving acquisitions of clean tech companies in the U.S. and wind farms in the UK," said Ayman Khaleq, partner at the Vinson & Elkins law firm in Dubai.
“The big banks have teams that focus on renewable energy as an asset class. However, the problem is that Islamic banks are not big enough to be able to cover specific sectors such as alternative energy,” he added.
In order to launch an alternative energy sukuk, the Gulf's small local banks would need to team up with bigger international players such as Deutsche Bank, Barclays, or BNP Paribas, which have been active on the renewable horizon.
But some experts have warned more originality in the Islamic finance industry could alienate investors, who are reluctant to take on fresh risk in the wake of Dubai’s debt crisis and recent sukuk defaults in the region.
WAITING FOR THE GREEN PUSH
Despite favourable environmental conditions in the Gulf offering fertile ground for green technologies, Abu Dhabi’s Masdar initiative is so far the region’s only flagship initiative. www.masdar.ae
“Although in the Gulf, with the sun and desert, you would think that solar energy would be worth harnessing Islamically or otherwise," Khaleq said.
Gulf states are in need of economic diversification as the oil bonanza is slowly drying out, and are urged to develop alternative energy sources.
An industry source said sovereign wealth funds from Bahrain or Malaysia, and family offices in Saudi Arabia or Kuwait, could nevertheless become potential investors.
“There might be venture capital type of funds that could look at these new technologies in the Gulf," the source added.
Khaleq is optimistic an alternative energy sukuk could see daylight soon: "I'm hoping in 2010, but Islamic investor, and generally regional investors, are being more conservative and so are the scholars,” he said.
“However, the ingredients are there: structures, acceptability of asset class, interest and technology. But it is a question of who will be the pioneer in making it all happen."
Writing by Martina Fuchs
Manama, Bahrain Feb. 16 - The Islamic finance industry has a problem. Its main selling point is that it is sharia-compliant, meaning it adheres to Islam’s prohibition of interest and avoids dealing with forbidden sectors such as alcohol and gambling.
But in the eyes of many, much of the industry is actually not sharia-compliant at all.
For one, the industry's benchmark is LIBOR, which is an interest-based concept and critics say it should develop its own. In addition, many scholars complain that the most popular of structures are, if not in direct breech of Islamic law, then widely abused.
“If you believe in Islamic finance and you believe money is just a medium of exchange then a lot of going on is not acceptable, because it's making money off money,” says Simon Eedle, managing of Islamic banking at Credit Agricole CIB.
So what will it take for the Islamic finance industry to clean up its act? Just your ordinary punter, it seems.
“I think the man on the street wants to do genuine Islamic banking,” Eedle says.
“I think the problem is the business is not yet developed enough to be able to offer anything other than conventional banking in a sharia-compliant format,” he says.
Abdul Rahman Tolefat, the CEO of Allianz Takaful also thinks your average believer will help the profit-driven industry to keep to the straight and narrow.
“I agree, the push will come from the retail side,” he says.
By: Raissa Kasolowsky