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Over 5,300 rooms to enter Jeddah hospitality market

JEDDAH, February 10, 2016

More than 5,300 hotel keys are expected to enter Jeddah’s hospitality market in the next three years, said a report.

Primarily represented by five- and four-star properties, the new additions will each account for 51 per cent and 31 per cent of total forthcoming supply, Arab News reported.

According to a report released by Colliers International, a leader in real estate services industry, the fourth quarter of 2015 witnessed the opening of three internationally branded serviced apartments, all of which are operated by The Ascott Ltd., namely the Ascott Tahlia (125 keys), the Ascott Sari (52 keys), and the Citadines Al-Salamah (136 keys).

However, Jeddah has seen a large delay in hotel openings during 2015, with close to 30 per cent of forthcoming supply being delayed for one year, and 25 per cent being delayed for two years. This trend is expected to continue over the next five years, the Colliers report said.

Moving across other major cities in Saudi Arabia, Riyadh will see corporate demand growth continue to slow due to the slowing economic activity countrywide, it said.

As a result, hoteliers are expected to continue targeting the domestic family market by providing new differentiated products catering to their needs and preferences.

However, branded hotel supply in Riyadh is expected to grow at an average annual rate of 28 per cent, with four-and five-star room stock accounting for 50 per cent and 46 per cent of supply, respectively. While this forecasted growth rate appears considerably high, it is likely to be affected by further delays, Colliers said.

Older hotels in the market will potentially face difficulties in maintaining their historically high rates as new, more modern properties enter the market, it added.

In Al Khobar, Dammam and Dhahran, branded hotel supply Dhahran is expected to grow at an annual rate of 16 percent between 2016 and 2018, with hotel developments concentrated within the four- and five-star segments.

Delays in project delivery are still expected, following the trend during 2015 where 36 per cent of forthcoming supply had been delayed for one year, and 38 per cent had been delayed from previous years.

Hotel markets in Al Khobar and Dammam cater to both corporate and leisure demand, and have seen a favourable performance between 2013 and 2014. However, 2015 witnessed a stronger decline in average rates, attributed to the lower corporate demand from oil companies in Al Khobar as a result of declining oil prices. This further lead to the demand from the corporate segment shifting from five- to four-star properties, in effort to reduce costs, forcing five-star establishments to reduce their prices to remain competitive within the market, the report said.

The decline in the euro further encouraged Saudi leisure tourists to travel abroad, resulting in low leisure demand for accommodation.

If oil prices continue to decline, it is expected that demand for hospitality accommodation will shift toward establishments with more affordable room rates.

The report also said that Makkah is expected to reach 25,519 branded hotel keys by 2018 despite delays in hotel openings seen in the past. The expected supply is more than double that seen in 2015.

Of the total forthcoming hotel supply until 2020, Millennium Hotels & Resorts and Hilton Worldwide represent 22 per cent and 12 per cent, respectively.




Tags: hospitality | growth | sector |

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