The Hippest City in the World

It's the latest hot spot for the rich and famous, and it doesn't have a Park Avenue address or a Los Angeles ZIP code.

In fact, it's a place many Americans can't find on a map.

Dubai (search) — a seaside city in the confederacy of sheikhdoms known as the United Arab Emirates (search) — has gone from being a sleepy desert town to the destination of some of the highest-profile names in the United States and Europe, and the fastest-growing city in the world.

"I'm able to say without hesitation that Dubai is the hippest place on the Earth," said Franko Vatterott, owner of the Human Interest Group, a sports management firm for the crown prince of Dubai. "Nothing there is good enough unless it's the best."

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After he was found not guilty of sexual molestation charges, pop prince Michael Jackson (search) flew to Dubai to take a break from the cameras and hobnob with Bahraini royalty and UAE racecar drivers.

His activities there included hosting children's parties at a water park and sailing around The World (search), a massive artificial island in the shape of the Earth that's being developed as a residential complex -- "Spain" is already sold out. The King of Pop is rumored to be considering selling his Neverland ranch to move to Dubai permanently.

British soccer star David Beckham (search) and his wife, former Spice Girl Victoria Beckham (search), vacation in Dubai frequently and are said to have bought property there along with much of the English national soccer team -- at a substantial discount.

Rod Stewart (search) is reported to have bought property in The World: all of "Britain." Rally driver Michael Schumacher (search) has property there, and a deal was just inked in mid-September in which Donald Trump's (search) name will soon be stamped on a complex to be called the Trump International Hotel and Tower of Dubai (search).

"The hotel will probably be built very shortly — we're just finalizing the architectural plans in the next few months," Donald Trump Jr. (search) told "The residential development will follow that."

Experts and people closely involved with the development of Dubai say it's no accident that the city's growing so quickly and glamorously.

The city that Dubai has become is the result of decades of long-term planning by its crown prince, Sheikh Mohammed bin Rashid Al Maktoum (search).

"Sheikh Mohammed's ultimate goal is to put Dubai in the ranks of the greatest cities of the world and it's quickly becoming a New York, Paris, Tokyo or Chicago," Vatterott said. "But whereas those cities took hundreds of years, this city took 25 years. It's got a New York business atmosphere and Cancun tourism. Combine the two and you get Dubai."

Attracting major celebrities is an obvious boon to any destination seeking tourism dollars and cachet, but the sheikh's idea of turning an oppressively hot town caught between the desert sands and the Arabian Sea into a cosmopolitan city to attract the likes of the Beckhams was an idea that was far from obvious. It was an idea born of desperation.

By Middle East standards of oil production, Dubai is small potatoes. In 1991, its reserves were estimated at a mere 4 billion barrels. At 1990 levels of production, Dubai's reserves will run out by 2016.

Armed with such data, Sheikh Mohammed took a gamble: He would count on the city's location at a crossroads between the East and the West, its relatively tolerant culture and his family's vast wealth to turn Dubai into a Mecca for foreign investment, finance and tourism.

In May 2002, in a controversial move, Dubai allowed foreigners to own land via three designated companies in what's called "freehold" status. Anyone who owns Dubai property is granted citizenship.

"Dubai recognized early on that the oil reserves weren't going to last, which is why they made a conscious decision to open up to the public," said former Secretary of Health and Human Services Tommy Thompson (search).

Thompson now works with Capital Partners (search), an American development company building in Dubai, and the only entirely foreign group granted freehold title to property in the UAE.

"With Dubai's economy right now, only 12 percent of the revenue of the city comes from oil," he said.

Unsurprisingly, people became ravenous for Dubai property after the freehold announcement, even though the U.S. State Department still warns that many of the issues regarding landholding rights in the UAE haven't been ironed out.

Almost overnight, the city has become a surreal juxtaposition of barren desert, 21st-century skyscrapers and extravagantly optimistic construction sites that extend as far as the eye can see.

"Sixteen percent of all the building cranes in the world are in Dubai right now," Thompson said. "Sixteen percent. That's absolutely amazing for a city to have that kind of economic development."

Builders are given a free hand in designing their sites — meaning that they can construct nearly anything they can envision there.

"As a developer, it's an incredible place," Trump said. "The stuff they're doing is amazing — they're limited purely by their imagination and the laws of physics. It's an area that's growing rapidly and it's where we want to be."

"The fact of the matter is: The world is their oyster. They can do whatever they want in terms of building as long as Sheikh Mohammed approves it," added Todd Thiel, managing director of Capital Partners. "You can own an island, an entire island, for $3 million," Vatterott said. "You can't get a place in downtown New York for that.

"And you don't build average slop homes like in the U.S. Each property is a beautiful niche — the World, the Palm Island, which if you see it from a bird's-eye view is shaped like a palm tree, a holy symbol here. They can't build the villas and apartments and houses fast enough."

Dubai's critical target date is 2010. That's when the sheikh has vowed that the current annual number of tourists to Dubai will have risen from its current 5.2 million to 15 million.

To achieve that goal, Dubai is aggressively courting celebrities and emphasizing the city's safety (it's rated second to Singapore), multiculturalism (about 85 percent of the population is foreign, the residents are of some 140 nationalities, and the signs are in Arabic and English), over-the-top comforts and laissez-faire cultural attitude.

"Stars are probably in love with the five- to seven-star hotels," Thiel said. "The Burj (search) [Dubai hotel] is almost so opulent it borders on -- I don't want to say gaudy -- but let's say they've got extremely high standards. A three-star hotel in Dubai is a four- or five-star hotel in New York. It's just a dramatically different paradigm, and in Dubai they will absolutely spend the money."

The sheikh has also concentrated on creating the infrastructure for a metropolis. The national carrier, Emirates (search), will soon have direct flights to and from San Francisco and Chicago, and it has been transformed into one of the world's premier luxury airlines (the ceilings on the planes feature twinkling "stars" when the lights go out).

Emirates uses Dubai as its main hub, and the city's a key stopping point between East and West for several other carriers. The airport also operates 24 hours a day without the noise restrictions that bedevil airlines in Boston's Logan or New York's John F. Kennedy, and travelers spending an hour between flights find themselves in a glossy, multilevel mall with posh stores and duty-free shops.

The UAE has also been ingratiating itself to international financial circles — the country has been strongly touting itself as meeting international business standards, and a U.S.-UAE free-trade agreement is expected to become reality as early as the first quarter of next year.

But it's still far from certain whether Sheikh Mohammed will meet his self-appointed deadline. The rapid growth has had some foreseeable consequences, like a daunting traffic problem, a burgeoning sex industry, questionable environmental practices and an urban-planning vision some critics have called haphazard.

It still also suffers from a stark class divide: a tiny, elite ruling cadre of Dubai natives, followed by a well-to-do population of Britons, Europeans, Canadians, Australians and Americans working as financial and technical specialists, all over a lower class of workers, most of whom are Indians.

"That kind of acceleration of growth is going to naturally have a degree of inflation, a degree of congestion," Thompson said. "It needs to have certain capital improvements, like water systems and transportation systems. But that's to be expected in a city that has had very explosive growth and tremendous economic stimulus."

The city, Thompson noted, is run like a corporation and has actually shown a profit.

Thiel said Dubai would be become a model for the Middle East city of the future. In UAE, "the Dubai experiment" is already being cautiously judged a success. Abu Dhabi (search) has been watching its sister city's accomplishments with a jealous eye, and is toying with the idea of similarly opening itself up to Western investment.

The class issues do exist, Thiel said, but the crown prince is making it possible to close those gaps.

"Yes, what's happening in the region involves the haves and have-nots, but Dubai is an economic miracle, and Sheikh Mohammed is setting the stage to create a middle class," he said. "He could've easily taken all the wealth and pilfered and done whatever he wanted to — I could point to Saudi Arabia — but when you think of it as one massive development, he's put his own dollars into the roads, the water, lighting and the master development. And it's catching on."