Over the last two years, both Riyadh and Jeddah have been drawing more hotel groups and brands — both local and international – on the back of major infrastructure projects and easing visa requirements.
According to Colliers International, Riyadh’s current hotel inventory includes 119 properties comprising 16,441 keys, while Jeddah’s inventory stands at 92 hotels with 11,276 rooms.
This number is set to increase, particularly in Riyadh, which is currently leading the hotel boom in Saudi Arabia, with 48 projects in the pipeline, followed closely by Jeddah.
The growth is reflected elsewhere too. Nearly 60% of the Kingdom’s construction pipeline of 143 hotels (as of February 2018) was forecast to open this year, according to a Saudi Arabia Hotel Construction Overview report by TopHotelProjects. Riyadh and Jeddah continue to rank highly in the Middle East’s top 10 most active cities for hospitality development, sitting third and fourth respectively, the report revealed.
But growing numbers mean pressure on RevPAR – Colliers data shows year-to-date September 2018 RevPAR was down 3%, due to a drop in ADR, in Riyadh. However, the city also witnessed a 4% increase in occupancy during the same period, highlighting that demand is on the rise.
Jeddah, on the other hand, bucked the trend of most Middle East markets, and witnessed a 9% growth in RevPAR, bolstered by strong ADR growth.
More than MICE
The growth in MICE business has been a key driver of rising tourism numbers. Riyadh is at the forefront of the MICE business, with almost half of all business events hosted in the capital. And while religious tourism will continue to drive hospitality and travel to Saudi Arabia, hoteliers believe new infrastructure developments will help boost numbers.
InterContinental Hotels Group vice president operations Bastien Blanc notes: “Riyadh is quickly becoming an exhibition hub and is home to some of the GCC’s newest entertainment shows and festivals. These developments are unique to Saudi Arabia, and we believe that the country will continue to grow and diversify its touristic offering while maintaining its own identity and DNA.”
SwissBelhotel senior vice president, operations and development for the Middle East, Africa and India Laurent A. Voivenel also highlights upcoming developments, particularly in Riyadh. He tells Hotelier Middle East: “The development of ‘Entertainment City’ southwest of Riyadh, which will include sports facilities, cultural attractions, safari elements and a Six Flags theme park, will help leisure demand— particularly from the domestic sector.
“Coming up also are Mall of Saudi, the Riyadh-based US $3.2 billion project due at the beginning of 2020, and Riyadh Medical Village the $1.5 billion project that will boost the demand for hotels in Riyadh.,” he adds.
The Jeddah market also looks equally promising, especially given its standing as a gateway to Makkah.
The Ascott Limited area general manager, Middle East, Africa and Turkey Vincent Miccolis notes: “Jeddah is the gateway to Makkah and off the back of growing demand in religious travel we see a consistent increase all year round in Jeddah from this. Combining all efforts from the government with religious tourism, domestic tourism and major development projects bringing workforce and tourism alike, the Jeddah market has great opportunity for year-round consistent growth of business.”
Marketing challenges
While the Jeddah and Riyadh markets continue to attract investment, the market is not without its challenges.
Talent recruitment and management remains a difficult thing and hotel groups compete hard to find and retain the right staff while also meeting Saudisation quotas.
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