1. Hoteliers investing in Saudi are confident demand and supply will even out
Hoteliers are optimistic that infrastructural developments in Riyadh, Jeddah and the holy cities will even up supply and demand – especially in Riyadh where supply is currently outstripping demand.
Four Seasons Riyadh GM, Greg Pirkle commented: “Rate is always about supply and demand and as supply continues to go up there might be a slight diminishing in rate or it might not grow as much as it’s doing just now. Will rates come tumbling down? I don’t think so – there are enough smart business men in this city – they wouldn’t be building hotels if they didn’t think the demand would increase as well. I’m very optimistic that the demand will catch up with supply.”
2. Branded long-stay accommodation is in demand
Pascal Gauvin, IHG chief operating officer for India, Middle East and Africa, commenting on IHG’s recent signing of the third long-stay Staybridge Suites branded property, to open in Al Khobar, said: “When you’re a businessman and you go away for one or two months on business, you need to have a home away from home and this is what we offer. You need to have reliability with everything, from internet access, to the quietness of your room at night to the quality of your food and meeting spaces."
"The long stay market could also be families coming at the weekend visiting corporate guests; they need space and often the hotel don’t offer this. The alternative is to go to a residence which is locally managed and probably isn’t what they want. I’m sure after Al Khobar, Jeddah there will be more Staybridge Suites. It’s a great opportunity in this country,” he added.
3. Jeddah is scrubbing up nicely
The Jeddah Municipality is shortly launching a clean-up and maintenance project for Jeddah Corniche and a project managed by Jeddah Development and Urban Regeneration Company (JDURC) will see the downtown area revitalised with a transit hub, retails zone, family entertainment restaurants and an exhibition centre forming part of an 850,000m square community to be completed by 2030.
The regeneration programme is set to encourage more tourists to the city.
4. Makkah is expanding fast
Raki Phillips, area director sales and marketing Middle East for FRHI, a group which currently has 100% of its operating Saudi portfolio (three hotels) based in Makkah, explains why the group will continue investing in the religious segment:
“Right now there’s a tremendous amount of construction and expansion that’s taking place in the central area around The Holy Mosque. They’ve knocked down a few buildings and are really expanding The Haram and as they do so they’ll be able to accommodate more and more people. There has already been investment into the infrastructure on the railway, the tram, and a lot of the roads and I think in the next decade Makkah is being transformed into a city that can accommodate a lot of travel. The kingdom is doing a great job to look at ways to improve the experience for the Muslim pilgrim and the Umrah season is year round; different countries travel for Umrah at different times so demand into the city doesn’t stop – it continues to grow and we hope to be part of that growth.”
5. The Saudi government will invest $30.9 billion in tourism over the next decade
Saudi Arabia investments in travel and tourism have grown at a CAGR of 5.8% since 2001 and are estimated to have reached SAR 20.55bn at year-end 2012. This is expected to increase at an annual rate of 6.7% to reach SAR 33.5bn of total investments in 2020.
Construction of a $22.5bn (SAR: 84.4bn) Riyadh Metro is to start early this year, and a five-year, $72m redevelopment and expansion of the city’s King Khaled International Airport (KKIA) will include terminals designed to give a future capacity of 30 million passengers annually.
Additionally, the first rail link between the Red Sea and Gulf will involve the construction of a 950km track between Riyadh and Jeddah, meaning that Jeddah may benefit from a boost in religious pilgrims passing through the city.
6. You can ‘create destinations’ in untapped markets
Hilton Worldwide vice president of operations for KSA Mahmoud Mokhtar on being the first international company to enter Tabuk with Hilton Garden Inn, to open in October this year:
“We are going to be the first international hotel company to open a hotel in Tabuk and we feel very confident about this. We’re looking at other smaller cities too, for example we’re opening a hotel in Jubail in 2020. We’re very confident because we have a very talented GM and there are currently no other international hotels there. We have a good history of going to remote places and creating destinations. It’s a challenge of course but like any project, with hard work and dedication we’ll get there. We’re starting in Tabuk with 108 rooms and we’ll take it from there.”
7. Religious tourism revenues are expected to reach SAR 60.9bn (US $16.2) by 2023
An ‘Extended Umrah Tourism Programme’ was launched by the Saudi Government in December 2013, allowing foreign nationals travelling to the country for Islamic pilgrimage to stay for a longer period, with the visa being valid for 30 days, after which it is converted to a tourist visa. Since currently Saudi Arabia does not issue tourist visas to visitors from any country, the month long visa facilitates visitors experiencing tourism attractions. In combination with this, religious quotas are being revised to allow more pilgrims into the country year on year. The government is expecting to see revenues total SAR 60.9 billion by 2023 due to an increase in the number of Hajj and Umrah tourists.
8. The younger Saudi market is becoming more sophisticated
TRI consulting senior consultant, Christopher Hewett said: “I think if you look at Saudi Arabia there’s a very strong youth population and it’s becoming a younger generation driven population. They are very technologically savvy and they do recognize international brands very quickly. I think that as they come into the secondary cities the quality of standard of what they offer will be recognized in the market – people will flock to that over the lower standards they’ve come to expect in the locally branded properties so that’s a great opportunity as the market has a desire for clean modern rooms with technology and comfortable rooms.”.
9. A strong domestic market is keen to stay in the country
Domestic visitors account for 56% of overall visitation according to a Colliers report, demonstrating that there continues to be a strong core of domestic travellers in the country. Since many Saudis tend to have large families, they often opt to drive because it’s more affordable than flying and many feel more comfortable in Saudi Arabia than in more western environments.
10. There’s an increasing demand for mid-market supply
TRI consulting senior consultant, Christopher Hewett said:
“We’re seeing a lot more investment within the mid-market segment. If you look at some markets in KSA they’re reaching a point of saturation with luxury and although there is still capacity for growth, there is more in the mid-market segment. There’s a number of mid-market and budget brands heavily focused on Saudi Arabia, such as Accor’s Ibis, IHG’s Holiday Inn, and Wyndhams Day’s Inn. A lot of the mid-market supply in the kingdom is of a low and poor quality and has been majority operated by local brands. There’s been very little international brand presence, especially out with the key markets of Jeddah, Riyadh, Al Khobar, The holy city and Dammam. So in the secondary cities there’s a great opportunity for mid-market hotels to expand.”