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Riyadh looks to leisure tourism for economy growth

RIYADH, November 1, 2017

Riyadh's hospitality sector remains heavily dependent on business tourism and travel, but the kingdom aims to diversify the economy from its dependency on oil and business tourism to include leisure and entertainment.

The year 2017 marks a record year for mega-project announcement in the kingdom's tourism sector such as the SR10 billion ($2.6 billion) entertainment company which is expected to open by 2019.

These economic ambitions are expected to benefit the hospitality sector in the city on the long-term. However, the recent increase in the supply combined with important seasonality in corporate travelers is keeping occupancy rates at a relatively low level which is typical for markets relying heavily on corporate demand.

Supply  
The market witnessed two completions during Q3 2017 including Centro Waha (290 keys) and Swiss Spirit Hotel & Suites Metropolitan (80 units), confirming the commitment of private developers and international operators to the city. Both of these hotels are situated on the northern commercial strip (between King Fahad Road and Olaya Street). This brings the total quality hotel rooms stock to 12,200 keys. Compared to same period last year, Riyadh’s hospitality supply has grown by 8 per cent, showing the recent supply growth in this sector.

Approximately 1,300 keys are expected to enter the market over the last quarter of the year including Crowne Plaza in Ar Raidah Digital City (386 keys), Fairmont Riyadh Business Gate (298 keys) and Hilton Riyadh Hotel & Residences in Ghirnatah business Park (645 keys), however some of these projects may delay opening to 2018. In the serviced apartment segment, Edafah Fraser Suites (95 serviced apartments) has pushed back its soft opening from Q3 2017 to Q4 2017 or even to 2018. Radisson Blu Hotel & Residence, situated in the Diplomatic quarter, will likely complete in Q1 2018, with 110 units.

Performance
Across the GCC countries and the Mena region, low oil prices have put the corporate segment under pressure for the last 2 years. Riyadh hospitality sector, which relies heavily on the business travellers, has been further impacted by this trend. The recent increase in the supply has also had a negative impact on year-to-date performance. The hotel sector in Riyadh continued to soften in Q3 2017. ADRs decreased 12 per cent year-to-August to reach $185, down from $209 last year. Occupancies also declined 4 per cent year-to-August to reach 52 per cent, down from 56 per cent.

RevPAR decreased 17 per cent year-to-August to reach $97 down from $117 last year. Those declines were the result of the decline in business travel and the shift of seasonality by Ramadan season. The reduction in public spending, declines in oil prices and growth of virtual and hybrid meetings have all combined to reduce the demand for business travel. According to HotStats latest report (year-to-July 2017), corporate segment has generated 47 per cent of the business of the hotels in Riyadh compared to 51 per cent last year same period. - TradeArabia News Service




Tags: tourism | Riyadh | Leisure |

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