Saudi hospitality firms to benefit from $43bn development fund

Published: 24 October 2020 - 3 a.m.
By: Josh Corder
Hospitality firms across Saudi Arabia are expected to enjoy large investments into infrastructure, construction and hotel rooms.

That is thanks to a deal signed in late September between Saudi Arabia’s Tourism Development Fund, Riyadh Bank and Banque Sandi Fransi to finance up to 160 billion riyals (US$43 billion) worth of tourism projects within the Kingdom.

The fund, founded in June with an initial $4 billion investment, is part of plans to diversify the economy in line with Saudi Crown Prince Mohammed bin Salman’s ambitious Saudi Vision 2030. The agreement is intended to spur investment across tourism in collaboration with private and investment banks.

A report from JLL published this week said hospitality firms are ‘riding high on the tourism fund pack’ already.

“While the hospitality industry remains challenged in the short term, in the long-term, however, and in light of the Tourism Development Fund agreement, construction activity in the sector will speed up as the kingdom strives to boost infrastructure, and increase the number of hotel rooms in line with Vision 2030,” said JLL.

In the same report, JLL shone a light on Saudi hotel performance during August 2020. During the third quarter, Riyadh saw the delivery of 400 keys, thus bringing the total stock to 16,000. Meanwhile, 84 keys were added to Jeddah’s hotel stock, which took the total to around 14,000, JLL stated.

A further 700 and 200 keys are expected to be delivered over Q4 in Riyadh and Jeddah respectively said the JLL report.

The investment fund and introduction of new keys were announced against the backdrop of a difficult summer period for Saudi hotels.

Occupancy rates in the year-to-date in August decreased to register 51 percent year-on-year, while average daily room rates (ADR) dropped only 1 percent to register $153. Revenue per available room’s (RevPar too fell 7 percent to reach $78.

Jeddah occupancy rates dropped to 38 percent, while ADR and RevPar declined 33 percent and 62 percent to hit $181 and $61 respectively.

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