Dubai will turn the Queen Elizabeth 2 liner into a luxury floating hotel off the Palm Jumeirah, the reclaimed islands that branch into the waters of the Gulf in the shape of a palm tree.

The liner, launched by the Queen 40 years ago, will move to its final berth in November next year, said government-owned Istithmar, which paid $100m for Cunard's longest-serving flagship. Istithmar said various sister companies would refurbish the vessel in line with its original decor and fittings, saving the world-famous ship from the scrap yard.

"We plan to keep the authenticity of the QE2 - by using some original plans we will make sure the integrity of the design is kept," Alan Rogers, Istithmar Real Estate chief executive, told the FT.

One feature that would have to go, however, was the ship's casino, he said. Banned by Islamic law, gambling remains illegal in the UAE - in spite of the relatively relaxed social mores that have helped attract many expatriates to this corner of the Gulf.

Dubai hopes the floating hotel will become a "must-see" tourist location as the emirate attempts to lure 15m visitors by 2012 to glitzy attractions such as indoor ski-slopes and a strip of Las Vegas-style themed hotels in the desert.

"I am delighted we will be able to create a home for her on the newest wonder of the world, the Palm Jumeirah," said Sultan bin Sulayem, Dubai World chairman, whose group oversees Istithmar, Dubai Ports World, and Nakheel, which is developing the Palm.



The Palm, which will house some 30 hotels in an area four times the size of London's Hyde Park, is adding around 78km of new waterfront to Dubai's crowded coastline.

Donald Trump is building a tower on the island, while the Cirque du Soleil is set to maintain a permanent residence on the island. Mooring the QE2 in Dubai mirrors previous marketing coups that have helped raise its profile in the UK.

The England football team acclimatised in the emirate ahead of the 2002 World Cup finals, generating reams of tabloid stories. Several footballers, including David Beckham and the England striker Michael Owen, went on to buy residences on the Palm.

Britons were the single largest national grouping among the 6m tourists who visited the sun-drenched emirate last year - not to mention the 120,000 British expatriates among a fast-growing population of more than 1.4m.

Dubai World's Nakheel, which says that about 25 per cent of its customers originate from the UK, has already handed over about a quarter of the Palm's 4,000 apartments and villas. It is also developing four other massive offshore projects, including The World - man-made islands that form the shape of the continents.