Investment bank Shuaa Capital said on Monday its Saudi unit had acquired land in Jeddah to build a SR160m ($43m) budget business hotel, in a bid to tap into the kingdom’s growing demand for low-cost travel.
The 254-room hotel, which will have 12,000 sq m of space, will be managed by Rotana Hotels under its Centro by Rotana brand.
The plot was bought through the bank’s closed-end real estate fund, the Shuaa Saudi Hospitality fund.
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Omar Al Jaroudi, chief executive officer of Shuaa Capital Saudi Arabia, commented: “This marks the second such transaction made by the Fund in Jeddah and underlines our view that the city is an exciting investment destination for Shuaa Capital. In Rotana Hotel Management, we have a partner who shares our commitment to generating strong investment returns for our clients as well as supporting the economic growth of the Kingdom.”
Selim El Zyr, president and chief executive officer of Rotana said Saudi Arabia was a "particularly promising" market for Rotana.
“Over the past six months, the hotel market in Jeddah has performed exceptionally well, with an increase in the average room rate of over 9%. This growth compliments the long-term prospects of the Jeddah economy which are being driven by extensive infrastructure and large-scale development projects," said El Zyr.
Real estate consultancy Jones Lang LaSalle said in May that Saudi Arabia would lead a regional boom in high-quality low-cost hotels, in response to demand from money-conscious business travellers and pilgrims.
Shuaa, one of the Gulf Arab region's largest investment banks, was hit hard by the global financial downturn as impairments related to troubled assets erased profits.
In the first quarter, Shuaa said it would cut 10.7 percent of its staff, or 39 jobs, to reduce costs following the regional turmoil which hit its quarterly results.
The company posted a small second-quarter net profit of AED0.6m in July.
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