Saudi Arabia hospitality sector witnesses strong growth

The organisers of The Arabian Hotel Investment Conference (AHIC) held a briefing event in Jeddah this week, for industry leaders and professionals to discuss the positive performance that the hospitality sector has achieved in Saudi Arabia in 2014, as well as the outlook for 2015 and beyond, with a particular focus on Jeddah and the Holy Cities.

The event was hosted by Makarim Annakheel Hotel and Resort in Jeddah, and the gathering was addressed by industry leaders including: Denis Soren, CEO Advisor, Dur Hospitality, Philip Wooller, Area Director for Middle East and Africa at STR Global; Filippo Sona, Director, Head of Hotels MENA Region at Colliers International; Edmund O’Sullivan, Chairman of MEED Events; Munir Ahmed, Director Hospitality, Naseel Holding Company Ltd.; Chiheb Ben Mahmoud, Executive Vice President- Head of Hotels and Hospitality, Middle East and Africa at  JLL; Dr. Ahmed El-Fakharany, Executive Managing Director at Alesayi Hospitality Company, and Hala Matar Choufany, Regional Managing Director at HVS.

Commencing with a market overview from STR Global Middle East and Africa for year-end 2014 results, the first session of the Saudi Briefing revealed that the region had reported positive performance results during December 2014, when reported in U.S. dollars. The Middle East and Africa reported a 3.9-percent increase in occupancy to 61.9 percent, a 3.2-percent increase in average daily rate to US$183.35 and a 7.3-percent increase in revenue per available room to US$113.53.

The overview presentation was given to the attendees by Philip Wooller, who said: “As the whole Middle East witnessed positive results in 2014, Jeddah specifically has had an overall successful end to 2014 and continues to improve its reputation as a destination for business and leisure. Demand growth was able to climb 2.9% for year-end 2014, with the supply increase of 1.9%. This resulted in positive occupancy growth achieving a level of 74.3% occupancy for the year.”

Phillip added: “Room rates also achieved an increase of 8.9% to SAR968.73 for year-end, which resulted in a RevPAR increase of 9.9%. Jeddah has been able to achieve rate increases consecutively over the past 32 months, with the highest ADR achieved for the city since 2000. Jeddah also continues to increase the amount of rooms under construction, with the most recent report showing over 2,000 rooms in the pipeline (2,728).”

On the holy cities of Makkah and Medina, Phillip said: “Looking at the holy cities of Makkah and Medina on a 2014 year-end basis, they achieved RevPAR increases of +4.3% and +8.6% respectively. Medina also reported a significantly higher year-end occupancy growth (+9.8%) compared to Makkah’s +5.8%.” said Philip Wooller, Middle East & Africa Area Director of STR Global.

“These cities are driven by religious tourism, being the birthplace of Islam. In recent years there have been restrictions put in place in terms of numbers allowed in the cities, with the vast majority of restrictions due to huge redevelopment plans, primarily in Makkah. At this stage it simply can’t take any more visitors due to the redevelopment and pending infrastructure changes, so it is currently a ‘controlled demand’ environment. Medina’s hotel market is smaller in comparison, thus it has more opportunity to grow as pilgrims travel to Medina and then to Makkah.”

“It is difficult to compare the two cities as their numbers are so diverse- Medina’s occupancy for the month of December increased 28.3%, in contrast to Makkah’s -0.0 flat year-over-year comparison rate.” Wooller said. “On the other hand, Makkah is still showing the higher year-end RevPAR (SAR529.04) against Medina’s SAR345.26, both driven by occupancy rather than ADR.”

Colliers International, who recently launched MENA Hotel Market Forecast, also emphasised in their report that the MENA region is offering significant opportunities to the global investors. The report also showed that Jeddah is currently witnessing a consistent demand and delays in new supply to stabilize the market.  They anticipate that the occupancy rate will reach 76%, ADR $262, RevPAR $200, and YoY RevPAR of 2% over the next 12 months.

Commenting on the forecasts for the region, Filippo Sona, Director, Head of Hotels at Colliers International, who also attended the Jeddah Briefing, said: “Investors and industry stakeholders are continually looking to understand the powerful factors shaping the MENA hospitality market. The forecast  will provide industry professionals with a basis for budgeting and pricing strategies as the sector undergoes significant development,  including the delivery of properties scheduled to come online in the mid to long-term. Colliers International has conducted valuations of 32-35,000 keys and asset management of 7800 keys in the region; this has provided us with a unique insight into what lies ahead for this dynamic sector.”

Dur Hospitality who hosted Jeddah Briefing this week has recently launched their new identity. Denis Soren, CEO of the Company, said: We developed the new identity according to best practices and trends, with the support of best in class brand consultants. Yet, we would like to emphasize commitment under the new brand to our corporate values including Honesty and integrity, Responsibility, and Creativity.

Through the new identity, we wish to serve as an exemplar for the successful and responsible development of the hospitality assets and for outstanding hospitality service, and accordingly, we aim to become the unequivocal partner of choice for any local, regional or international partner in Saudi.”

Jeddah Briefing was held by the organisers of AHIC 2015 Conference, which will take place next year from 5-7 May 2015 at Madinat Jumeirah in Dubai. The Conference is organised by Bench Events and MEED, and will include key participants such as: Carlson Rezidor Group, Jumeirah Group, Accor, Al Habtoor Group, Hilton Worldwide, InterContinental Hotels Group(IHG), Marriott International, Starwood Hotels & Resorts, Wyndham Hotel Group, ESPA, Insignia Worldwide, Melia Hotels International, Premier, Premier Inn, Shaza Hotels, Crystal International Standards, JA Hotels & Resorts, Faithful + Gould, JLL, Golden Tulip, HVS, Colliers, STR Global, Centara International Management Co, PricewaterhouseCoopers (PwC), Invest Tourism Maldives and FRHI Hotels & Resorts.

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