Finding the key to the Kingdom

The leisure tourism is being driven by Saudi locals wanting to holiday in Al Khobar, but also taking advantage of the King Fahd Causeway to Bahrain, which also allows Bahrainis to visit Saudi Arabia.

"There's leisure demand as well as corporate demand in these areas and we see several opportunities for us. In fact we've recently signed the Crowne Plaza Al Khobar, which is under construction and we're looking at other Holiday Inn opportunities in that area as well," says Kasselis.

"Other than that, you'll see in the longer term a lot of Red Sea resorts being developed. If I look at our strategy and the tourism potential of Saudi Arabia, you've got the mountains in the south near the Yemen boarder, you've got historical sights - by that I mean Madeim and Saleh - you've got a lot of religious sights but also the Red Sea beaches, diving and water sports."

Other lesser-known regions are also opening up and emerging as possible areas for hotel development, such as Hail - also the site of one of the economic cities.

"In Hail there are major highways and rail lines being built through Saudi Arabia, and as these urban centres develop more we know there'll be more demand for branded hotel accommodation. Saudis are very brand conscious, because a brand is a promise," says Kasselis.

Hilton Hotels' Herzog says that, given the size of Saudi Arabia, it could also be a very good opportunity for the introduction of mid-market hotels, such as Hilton's Doubletrees, Hampton Inns and Hilton Garden Inns brands "that would be ideal to cover secondary locations or to act as second hotels in major cities that we're in".

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"As the market develops, the country grows and more things happen away from the traditional centres of Riyadh and Jeddah and spread into the country, the feasibility of having mid-market hotels in secondary cities will grow. And of course we have the massively-growing population that love to travel within the country and would be ideal guests for those properties if they go through those secondary cities," he adds.

IHG's Kasselis agrees that hotel owners in Saudi Arabia as in the rest of the GCC countries, have been focusing heavily on the five-star market and that the country is now ripe for the introduction of mid-market accommodation.

"We know from our global experience, particularly in the US and UK with Holiday Inn, that the slice of the pie in terms of mid-scale is far bigger than the luxury end of the market. When you have room rates in markets exceeding US $200 that's not for everybody," he says.

The fact that many Saudis travel with their families, drivers and housemaids means that apartment accommodation is very important, and Kasselis sees the "potential for extended stay in Saudi Arabia."

"We've recently announced the launch of Staybridge Suites in the Middle East and we're working on several projects in Saudi Arabia because we see a lot of potential for that extended stay apartment accommodation."