Upsetting the establishment
These concerns over the possible effects on market performance because of the current rush for market share are being echoed by other established and upcoming hotels in the city.
Hyatt Regency Riyadh general manager Nizar Weshah, who is leading pre-opening at the 257-room hotel, believes that with so “many operators entering the market within 2013 or 2014, it is inevitable that the supply of quality hotel rooms will surpass the demand, which will eventually have an impact on the overall market in terms of occupancy and average rate.”
A recent increase in infrastructure investment is also threatening to impact hotel performance, as with the city’s business hubs widening and locations becoming more diversified, customer demand is increasingly being diluted.
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“In our case, the commercial business hub is slowly moving towards the northern part of the city,” says Radisson Blu Hotel, Riyadh GM and regional director of Saudi Arabia Mohamed Benamar.
“Add to that an influx of supply, especially from international hotel brands that are developing in the King Abdullah Financial District and towards the Riyadh airport and this will provide a great challenge to us as these developments will affect our retail and corporate segments in particular,” he says.
“However, all of these projects will help to reinforce the reputation of Riyadh as a first-class investment destination and will meet the demands of the region’s growing population.
Furthermore, they will create more job opportunities for residents and generate greater economic contributions from the private sector particularly within the hospitality industry,” Benamar continues.
This positivity is indicative of a wider market optimism that, whatever new hotel developments are thrown at it, or how fast they expand into it, Riyadh will be able to absorb any new property.
“In Riyadh there has been a surge in the number of hotels in development. For a long time it was limited to a very small number of players.
However, starting in 2006-2007 more hotel development started, led by investment from public and private entities because of the growing regional importance of Saudi Arabia, and therefore Riyadh as the capital,” says Jones Lang LaSalle executive vice president head of hotel advisory, Middle East & Africa Chiheb Ben Mahmoud.
“This has since been boosted by strong oil prices and a strong political willingness to implement high profile infrastructure projects such as the King Abdullah financial district, which has been a strong signal that the government means business.
This then had the knock on effect of producing higher demand and activity in the hospitality sector,” explains Mahmoud.
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