It is misleading to think that slashing rates can help a business stay competitive
All lessons learnt during the financial crisis were to do with survival in an environment that, frankly, nobody in the real estate industry here had witnessed before.
- Image Credit: Abdel-Krim Kallouche/Gulf News
- The Dubai Marina. There was a period when selling property in Dubai required little or no effort and even less business acumen or professionalism.
In order to survive, you needed to develop a competitive edge. To do this, you needed to adapt which required a brutally honest assessment about your own capabilities and the capability of your business to continue to provide the professional services that clients require but within a totally new business context emanating from the starkest of economic realities.
However, it’s not just about introspection, but also about making sense out of the chaos. The market changed rapidly during the recession requiring the rapid development of new solutions to new challenges. I think this is the greatest lesson that we learnt.
Innovation and fresh thinking will always prevail regardless of the circumstances. If the market is hot or cold, innovation has and always will always provide the competitive edge for us and our clients.
First mistake in 1929
During the Great Depression of 1929, the first mistake that many companies made was to downsize their sales force. This action essentially compounded their problems because it further inhibited revenue generation. This was one thing that we refused to do and, during the course of the recession, we actually grew our sales force by 30 per cent and, not coincidentally, our revenues grew in the four years.
So the focus was really on revenue generation complemented by realistic cost control measures designed to enhance productivity, not strangle operations.
Revenue generation was brought about by expanding services as opposed to slashing the prices of our services. The diversity ensured that we did not have to rely on just “buying and selling” to survive.
On the cost side, it was important to modify the business to reflect a more variable cost structure. Fortunately, we had always been conscious of overheads, particularly those that were fixed in nature and re-structuring the business to minimise those fixed costs was not too difficult to achieve.
Finally, it was about people. To develop and maintain a competitive edge any business must have a team dedicated to providing the best they possibly can for their clients. This includes not just generating the solutions but executing and delivering on promises as well.
During the recent crisis, overstretched is probably not the right word to describe the situation property companies were in. Many companies were not structured to deal with the crisis and had operated during a period when selling property in Dubai required little or no effort and even less business acumen or professionalism.
A seller’s market
It was a seller’s market of a magnitude that has rarely been seen before and is unlikely to be seen again. The recession achieved what recessions typically do by revealing the flaws and weaknesses of those organisations that had been conducting business with limited vision or a long term perspective. While the short term gains may have been exhilarating, it typically came at the expense of long term survival.
The industry will always be cyclical in nature and only those organisations that are constantly improving, adapting and developing will last in the distance. To do that, an organisation must be able to capitalise on the good times and minimise the effect of the bad times.
We must understand that we are living in a region which is undergoing significant challenges, most of which have emanated from regime changes and the global recession. There is no doubt that Dubai’s real estate industry has benefitted from significant capital inflows as a result of regional events and there will always be an “ebb and flow” effect depending on the geo-political situation at any given time.
It’s an old adage but a good one… plan for the worst and hope for the best.
— The writer is the managing director of Harbor Real Estate.