Saudi Arabia’s hospitality and tourism industry is witnessing a renaissance with investment into its travel sector growing, as hoteliers diversify its offering for a maturing audience
Saudi Arabia’s tourism and hospitality sector has recently been in the news – and for all the right reasons. The government is keen to develop its tourism sector to reduce dependence on oil, and figures released by the World Travel and Tourism Council (WTTC) showed that Saudi-based industries in direct contact with tourists are expected to generate more than US$25bn in 2019, contributing approximately 3.3% of the Kingdom’s GDP.
According to the MENA Quarterly Review report released by Colliers, with more than 2,000 keys entering the market in Q2 2019, and an expected countrywide growth rate of 9% per year (despite delays with a number of projects), Saudi Arabia needs to attract additional regional and domestic tourists to maintain current occupancy levels.
Collier International’s head of hotels for the MENA region, Christopher Lund reveals that most of the major Saudi cities have seen growth in occupancy levels in 2019, with the highest growth experienced by hotels in Dammam and Makkah. “Although the markets have seen increase in demand, a combination of new supply and rate compression has resulted in a drop in RevPAR,” he adds.
Research conducted by Colliers on behalf of Arabian Travel Market (ATM) 2019 also showed that Saudi Arabia’s domestic tourist trips are projected to rise by 8% in 2019 (the Kingdom saw more than 47 million domestic travellers in 2018), while inbound visits from international markets are expected to grow by 5.6% per year.
To boost numbers, the Kingdom has been introducing a number of initiatives that it hopes will help deliver the number of domestic and international tourists it needs to be sustainable. Among these include the variety of gigaprojects in development, the launch of entertainment projects via GEA, visa-related initiatives including the 30-day Umrah Plus visas, e-visas for tourists, and more.
There are, therefore, plenty of opportunities for hoteliers to capitalise on. Many hotel groups are working hard to boost their Saudi Arabian portfolios. Following the opening of Park Inn by Radisson Makkah Aziziyah in July 2019 and the scheduled launch of two new midscale signature Park Inn hotels by Q4 this year, Park Inn by Radisson Hotel Riyadh and Park Inn by Radisson Jeddah Madinah Road, Radisson Hotel Group will hit 45 operating properties in the Kingdom.
Meanwhile, Millennium Hotels and Resorts is gearing up to open six new hotels in Makkah, Madinah, Tabouk, Jizan and Baha in addition to the recently opened Millennium and Copthorne Makkah Al Naseem hotels.
Hyatt also has ambitious plans for the Kingdom: it aims to double its brand footprint by 2023, with ﬁve additional Hyatt-branded hotels to open by then, adding approximately 1,300 rooms to the region. Hilton currently has 13 hotels open in the country and a pipeline of 41 hotels across its portfolio of brands. Hilton vice president KSA and Levant Kamel Ajami says the country’s market is showing positive signs.
He commented: “The total Saudi Arabia upper-upscale hotels sector is showing healthy growth in terms of occupancy, although there have been some slight declines in ADR, mostly due to increased supply in the market. We have seen strong growth throughout the past 12 months, in line with our expectations, and are now starting to see even healthier progression and we expect this trend to continue.”
And while IHG’s InterContinental brand has been firmly embedded within Saudi Arabia for four decades, the hotelier is now looking to strengthen its presence further by bringing new brands into the market, including upper luxury brand Regent Hotels & Resorts and boutique luxury brand Kimpton Hotels & Restaurants.
The upscale segment is also under expansion– the world’s largest voco has been signed in Makkah with 4,200 rooms. Furthermore, IHG’s mid segment is also gaining traction with Holiday Inn, Holiday Inn Express and Staybridge Suites in cities such as Riyadh, Jeddah, Madinah, Makkah, Dammam and Al Khobar.
Louis Abboud, vice president development – Accor Middle East, says occupancy has relatively increased over the past 12 months, “as a new entertainment calendar has been implemented throughout Saudi Arabia, as well as projects that are focused towards Vision 2030”.
Abboud also points to Saudi Arabia’s pipeline, and Accor currently operates 36 properties (13,782 keys), with another 10,776 keys in its pipeline portfolio. Since January, Accor has opened two new properties in Saudi Arabia – Mövenpick Tahlia Jeddah, the fourth Mövenpick in Jeddah, and Fairmont Riyadh, situated in the Business Gate community.
More is on the cards for Accor.
Abboud reveals: “The group is currently in active discussions with the Public Investment Fund (PIF) and key stakeholders driving the development of additional giga projects including the Red Sea, Amaala and Qiddiya with a view to launching new hospitality concepts in each.” Accor was the exclusive hospitality partner for the Winter at Tantora Festival, held in UNESCO World Heritage Site Al Ula. Additionally, Shaden Resort Al Ula will become part of the MGallery Experience following a property enhancement plan due for completion by November 2020.
Mid-market and lifestyle in vogue
The wave of mid-market and lifestyle hotels in the Middle East is now arriving in Saudi Arabia. Collier International’s head of hotels for the MENA region, Christopher Lund says the popularity of mid-market and upscale hotels is growing in the Kingdom. “Increased competition and increasing appeal to the mass market in the future provides opportunities to develop different hotels, not just standard ﬁve-star business hotels,” Lund adds.
Hoteliers are in agreement. IHG managing director, India, Middle East & Africa Pascal Gauvin says that with the transformation of the market, the Kingdom is expected to welcome a diverse profile of travellers in the years to come.
“This has resulted in the need for quality branded accommodation across all hotel segments including luxury, upscale and midscale. We also anticipate a demand for more lifestyle hotels. Moreover, the youth in KSA is keen to stay in hotels that have a distinct design philosophy and offer differentiated stay experiences.”
Louis Abboud, vice president development – Accor Middle East also highlights mid-scale and lifestyle properties as trend, says that Accor has identiﬁed a vast opportunity to lead and introduce these in key locations across Saudi Arabia. Hilton also recently signed a deal with Shomoul for four hotels at Avenues – Riyadh, including the introduction of lifestyle brand Canopy by Hilton, as well as master development deal with Alshaya Group for 70 Hampton by Hilton hotels across the Middle East and North Africa, many of which will be developed within Saudi Arabia.
Source: Hotelier Middle East