Budget brand Premier Inn has already made its regional debut in Abu Dhabi and has expansion plans in the UAE, Doha and Saudi Arabia. Budget brand Premier Inn has already made its regional debut in Abu Dhabi and has expansion plans in the UAE, Doha and Saudi Arabia.

The market for budget hotel brands in Saudi Arabia is one full of opportunities — done well, it promises profits, but offering too much for too little confuses clients and cash flow, warn experts.

Between now and 2014, around 1607 budget hotel rooms are expected to enter the market in Saudi Arabia, according to new research by Christie + Co.

In addition to this, on June 27 Wyndham Hotel Group signed a master franchise agreement with Saudi Automotive Services Company (SASCO) to develop 20 hotels under its budget brand Super 8 in KSA over the next five years. A number of homegrown operators have also emerged in this segment.

The influx of operators signing deals for their lower-tier brands in Saudi Arabia is being driven by increased demand for affordable hotel accommodation following a crackdown on hotel classifications by the Saudi Commission of Tourism and Antiquities (SCTA).

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“The domestic market dominates the overall tourism industry — outside the religious area — so that covers travellers of wealth as well as those of limited means,” commented Christie + Co director for the Middle East and Northern Africa John Podaras.

“There wasn’t always a lack of affordable hotels in Saudi Arabia, but many of them were awful. It horrifies me to think that people were forced to stay in such conditions. When SCTA took over the classifications system from the various chambers of commerce around three or four years ago, many of these hotels dwindled away. Today, if you cannot provide a quality product, you become declassified,” Podaras explained.

While the number of budget rooms has fallen, demand remains — leaving the door open for international operators to step in with their limited-service and mid-tier brands — many of which are still unknown in the Saudi Arabian market.

In 2012, new openings, including Accor’s Ibis and Golden Tulip’s Tulip Inn, will add 514 limited-service rooms. Next year, the introduction of HMH’s EWA brand and Marriott’s midscale Residence Inn will together add a further 223 rooms. Supply will be ramped up significantly in 2014 with 915 budget rooms due to come online — distributed among brands such as Rotana’s Centro and IHG’s Holiday Inn Express and Accor’s Ibis.

With only 25% of Saudi Arabia’s hotel supply currently in the three-star budget market — according to Christie + Co’s latest data — many experts believe that there will be a lot more announcements over the coming years.

“At the moment, 70% of the pipeline is still upscale,” said Philippe Baretaud, vice president, head of development for Europe, the Middle East and Africa, Accor.

Darroch Crawford, managing director, Premier Inn Hotels MEA added: “It’s an anomaly in the Saudi Arabian market and I think it’s going to change rapidly over the next three to four years.

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