Saudi Arabia hotel sector undisturbed by economic slowdown
LONDON, February 15, 2017
Despite continued economic slowdown and low oil price environment, the hotel market segment in Saudi Arabia continued to display a positive trend with a number of new luxury hotel openings in 2016 as well a positive growth projected for 2017, said a report.
According to Saudi Arabia Full year review by Colliers International, the regions of Riyadh, Jeddah, Makkah, Khobar, Dammam, and Dhahran witnessed a boost in hotel supply, with the highest growth recorded in Makkah.
By the end of 2016, Makkah registered a total number of 13,911 hotels, an increase of 21.13 per cent over the total supply in 2015. This included the opening of the 1,624-key Swissôtel Al Maqam in Q4 2016.
Riyadh followed close behind with 8,363 hotels (up 23 per cent) at the end of 2016, followed by Madinah with 6,421 hotels (up 14.9 per cent), Jeddah with 5,646 hotels (up 25 per cent) and Khobar, Dammam and Dhahran with 4,001 hotels (up 7 per cent).
The majority share of the total branded hotel supply remained in the five-star and four-star category, pointing out the opportunity of increasing the share of mid-market hotel segment, especially under the present market conditions.
Occupancy levels, however, remained far from positive in 2016, dipping due to market conditions owing to the economic slowdown. Khobar, Dammam and Dhahran recorded the steepest fall (down 18 per cent), followed by Jeddah (down 11 per cent), Riyadh (down 7 per cent) and Madinah (down 3 per cent). Makkah was the only region to report a positive growth (up 3 per cent).
Looking ahead, occupancy levels across the kingdom are not expected to increase drastically as market conditions carry forward. Hotel supply, however, will see a boost over the next two years with Makkah taking the lead (15,103 new hotels by 2019). Jeddah will have an additional 5,147 hotels over the next two years, Riyadh will have 4,776 new hotels, and Khobar, Dammam and Dhahran will have 2,048 new hotels by 2019.
The new supply across the kingdom can expect to be balanced out by increased visitor levels over the next two years as Riyadh is expected to see the opening of a Six Flags theme park and two major malls, while the King Abdulaziz Airport Expansion (2017) in Jeddah and Jeddah Economic City (2020/21) will be among the key demand drivers in the region going forward.
Makkah will also see a boost in visitor numbers following the removal of restrictions on quotas for foreign pilgrims. Furthermore, the Haramain High Speed Railway (2017) and the Makkah Mass Rail Transit System are expected to improve accessibility to and within Makkah, which in turn will open up areas for hospitality development opportunities. Khobar, Dammam and Dhahran will also see an increase in domestic leisure travel as emerging areas of interest for hospitality development exist in half Moon Bay. - TradeArabia News Service