“This is because a large proportion of the existing hotels are independently operated, and these properties are likely to face significant pressure on their performance in the face of competition from the growing number of branded and better quality hotels. The shift in demographics of religious tourists — with more youngsters making up visitor numbers — and their quality preferences, including better variety and quality of food and beverage, for example, will also increase the pressure on hotels to upgrade to stay competitive,” he notes.
Despite the challenges, however, hoteliers remain optimistic about the Makkah and Madinah markets.
Blanc says: “In the near term, we expect the supply to remain buoyant and cause some strain in terms of performance, however, as this supply stabilises and KSA begins to ease up on the number of guests entering the country, we should see an upward trend in performance in 2019.
“Significant efforts have been made to develop and modernise these markets and there is a great selection of both internationally and locally branded hotels offering travellers a range of stay options.”
The market is expected to evolve further with noteworthy efforts being made by the government, such as expansion of the two Holy Mosques, development of transport infrastructure, including modernising and increasing the capacities of the airports, development of metro, railroad and train projects.
Harnisch adds: “We anticipate robust growth in demand from both residents and pilgrims. We also see considerable potential for the branded economy hotel segment, with many visitors being more price-sensitive.”
Aboobacker, however, offers a more pragmatic view. He notes: “We expect hotel performance levels in Makkah to remain under pressure in 2018, driven by the imbalance in supply and demand growth in the short term. We expect the demand to continue to grow this year as the government continues to increase the number of Umrah and Hajj visas. However, a marked growth in supply is expected to keep competition high as the city is expected to see the addition of over 7,800 keys to its inventory this year.”
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