JLL released its first report on 'Makkah, A City within a City', which revealed that there is an "unlimited global demand" for hotels and tourist facilities in the city due to the continued growth of religious tourism.
Makkah is one of the biggest hotel markets in the Kingdom, with 27,000 rooms (compared to 11,000 in Riyadh and 9,400 in Jeddah). It is estimated that around 75% of the demand from pilgrims is accommodated in hotels (with the remaining 25% in other forms of accommodation). Around 60% of the current stock of hotel rooms are classified as ‘budget accommodation’ - a much higher proportion than in other cities in Saudi.
The Saudi 2030 Vision recognises the role religious tourism can play in diversifying the economy with religious pilgrims currently contributing 2-3% of Saudi’s GDP. Many hotels in Makkah have traditionally only operated during peak months, but the JLL report revealed that with the entry of more international operators, this pattern is now changing, with more hotels operating throughout the year.
There are plans to roughly double the capacity to accommodate both Umrah and Hajj visitors to around 15 million and five million respectively by 2020.
The entry of international hotel brands into Makkah reflects market confidence, according to the report, with Conrad selecting Makkah for entry into the Saudi market, Marriott and Best Western announcing expansion in the city and Carlson Rezidor entering with a pipeline which includes the Park Inn by Radisson Al Naseem Makkah (2016) and Park Inn by Radisson Aziziyah Makkah (2017).
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Jamil Ghaznawi, national director and country head of JLL Saudi Arabia said in a statement: "Increasing religious tourism in line with 'Saudi Vision 2030' will create huge opportunities in the retail, hotel and broader accommodation sectors in Makkah. The long term prospects for the hotel sector are extremely positive given the reliance on accommodation providers to support the global unlimited demand of religious pilgrims to Makkah.
"More than ever, the key to capitalising on growth of the real estate market is the strong cooperation between public and private sectors to invest in new and existing accommodation. An added benefit is the maxim of ‘build it and they will come’ which applies more aptly to the Makkah market than any other city in the region."
He added: "In addition to increasing accommodation, the success of the Saudi Government’s plans to expand the number of religious visitors also relies heavily on the ability to address transportation capacity. While there have been significant investments to improve the networks serving Makkah, many of the projects have been affected by the stringent 2016 budget."
There are currently restraints on the number of pilgrims due to a cap on quotas. However, these are expected to be relaxed upon completion of major infrastructure improvements in 2017 and 2018.
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