Fair game
With the development of Saudi Arabia’s hotel industry comes added competition. According to data by hospitality research firm Christie + Co, there are 6896 budget and mid-scale hotel rooms in the current project pipeline, including 480 rooms within two new Park Inn by Radisson hotels coming up in Jeddah and Riyadh.

“It’s typical, for Europeans especially, to look for four-star hotels because they are value for money and many firms like their management to stay in four-star properties because it gives off the right signals about the company,” Eikeland observes.

“So there is a market for more Park Inns and four-star hotels in Saudi Arabia in the future without a doubt,” he says, but adds that the luxury market in the area is a different story.

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“There are many prestigious hotel projects coming to Al Khobar and Dammam areas, and the rest of the Kingdom, in the future. At this point, the demand is not enough to support only five- and ‘six-star’ hotels. There are a huge number of people who are normal people looking for mid-scale properties,” he says.

According to Eikeland, an oversupply of luxury, high-end hotels in the area is threatening to negatively impact business as five-star hotels under pressure slash rates to four-star prices.

“I see the war among the five-star hotels getting tougher and if that gets tougher it’s going to get tougher for me because their rates get closer to mine,” he says.

Eikeland believes part of the problem is due to the fact that minimum rates for each hotel category are set but not enforced by local tourism bodies.

“It is not working, the caps have been there for more than a year, but hotels are breaking the rules. They know they should operate within the rate frames of four- or five-star hotels, but they’re not being punished for not doing so. It upsets me because the rules are crystal clear, I would like to see them enforced.”

However, he welcomes ‘friendly competition’: “It’s difficult to compete with a five-star hotel. I’d rather see more four-star hotels, then we can compete on the right level.”