KSA hos­pi­tal­ity mar­ket: on the brink of a new era

Saudi Ara­bia’s hos­pi­tal­ity mar­ket is ex­pected to ex­pe­ri­ence a huge surge in ac­tiv­ity in the com­ing years, as the King­dom con­tin­ues to im­ple­ment a range of so­cio-eco­nomic re­forms. Filippo Sona, di­rec­tor, head of ho­tels, MENA re­gion, at Col­liers, high­light

Hospitality News Middle East - - IN THIS ISSUE - col­liers.com

Sev­eral mas­ter­plans launched pub­licly re­cently are al­ready mak­ing an im­pact, with the re­sults of key ini­tia­tives re­flected in the fig­ures that show tourism hav­ing in­creased in the King­dom since the begin­ning of 2018. Oc­cu­pancy lev­els have risen across most of Saudi Ara­bia’s cities in the first quar­ter of the year.

De­mand up in emerg­ing seg­ments

Saudi Ara­bia’s source mar­ket is pre­dom­i­nately cor­po­rate, es­pe­cially in cities such as Riyadh, where more than 80 per­cent of de­mand is gen­er­ated by cor­po­rate visi­tors. How­ever, the launch of Saudi Vi­sion 2030 and the sub­se­quent so­cio-eco­nomic re­forms have led to an in­creased fo­cus on leisure, re­li­gious and do­mes­tic tourism, with a view to ex­pand­ing these seg­ments.

Visa re­forms were in­tro­duced in Saudi Ara­bia at the begin­ning of last year, aimed at sig­nif­i­cantly boost­ing vis­i­tor num­bers. The new Um­rah (pil­grim­age) plus visas are a novel con­cept that pro­vide these visi­tors with the op­por­tu­nity to stay for an ex­tra pe­riod of time in the coun­try and ex­plore var­i­ous cul­tural and heritage hotspots. The King­dom is ex­pected to launch a ded­i­cated tourist visa in the near fu­ture, as a step in the im­ple­men­ta­tion of the Saudi Vi­sion 2030. The holy cities of Makkah and Mad­i­nah have also ben­e­fited from the in­creased visa quo­tas, in line with the King­dom’s tar­get of reach­ing 15 mil­lion Um­rah visi­tors by 2020.

The Gen­eral En­ter­tain­ment Au­thor­ity, which was launched in 2016, con­firmed

Saudi Ara­bia’s plans to chan­nel USD 64 bil­lion into de­vel­op­ing the coun­try’s en­ter­tain­ment in­dus­try over the next 10 years, in­clud­ing open­ing cine­mas and theme parks, such as Six Flags. Its plans in­clude host­ing more than 5,000 con­certs and fes­ti­vals in 2018 as part of the King­dom’s so­cial and eco­nomic re­form pro­gram. Planned projects an­nounced re­cently in­clude a huge en­ter­tain­ment re­sort at Qid­diya, which will span 334 sq km, mak­ing it more than twice the size of Dis­ney World, Florida. Sched­uled to open by 2022, the de­vel­op­ment aims to at­tract 1.5 mil­lion visi­tors an­nu­ally and will in­clude the Six Flags theme park, wa­ter­parks, mo­tor sports, cul­tural events and va­ca­tion homes. Key mile­stone events have al­ready taken place this year with suc­cess, such as the March open­ing of the coun­try’s first cinema af­ter nearly four decades and the host­ing, in April, of a ma­jor World Wrestling En­ter­tain­ment (WWE) event in Jed­dah, which at­tracted nearly 60,000 fans.

Mega projects, such as the Red Sea ini­tia­tive and NEOM, are also ex­pected to change the face of Saudi Ara­bia’s tourism in­dus­try by putting the King­dom on the map as a leisure des­ti­na­tion. Launched in 2017 and sit­u­ated be­tween the cities of Um­laj and Al-wajh, the Red Sea project is a mega-tourism ven­ture com­pris­ing re­sorts and lux­ury res­i­dences across 50 pris­tine is­lands, as well as a na­ture re­serve sit­u­ated in the area. NEOM, mean­while, is a USD 500 bil­lion busi­ness and in­dus­trial zone in Tabuk, which ex­tends into Egypt and Jor­dan. It will take the form of a fully in­de­pen­dent eco­nomic zone with its own laws, taxes and reg­u­la­tions. The first phase soft he Red Sea project and NE O Mare ex­pected to be com­pleted by the end of 2022 and 2025 re­spec­tively.

Hos­pi­tal­ity sup­ply in­di­cates 3-star po­ten­tial

A to­tal of 6,000 branded keys are ex­pected to en­ter the Saudi mar­ket in 2018, tak­ing the branded ho­tel sup­ply to 51,600 keys, with the num­ber set to reach 75,200 by 2020. From the con­firmed branded ho­tel sup­ply in the pipe­line, 38 per­cent is ex­pected to be 5- star prop­er­ties, with 49 per­cent ear marked for the 4- star cat­e­gory. Mar­kets such as Jedd a hand Makka hare pro­jected to grow at an an­nual rate of 20 per­cent un­til 2020, while planned mega-projects, such as NEOM, the Red Sea ini­tia­tive and the Q id di ya ven­ture, look set to pro­vide the lo­cal mar­ket with an ex­ten­sive ar­ray of new and ex­cit­ing hos­pi­tal­ity de­vel­op­ment projects.

New ho­tel open­ing sin the first quar­ter of 2018 in­clude the Crow ne Plaza RDC Ho­tel and Con­ven­tion Cen­tre( Riyadh ), the Radis­son B lu Jedd ah C or niche and the Park Inn by Radis­son Dam ma mI nd us trial City. Cur­rently ,5- star prop­er­ties ac­count for 65 per­cent of the branded ho­tel sup­ply in Saudi Ara­bia, with 4- star facilities mak­ing up 30 per­cent of the of­fer­ing. The share held by the 3- star seg­ment stand sat less than 5 per­cent, in­di­cat­ing a con­sid­er­able gap in the mar­ket, given the ex­pan­sion al­ready un­der­way in the in­dus­try.

Hos­pi­tal­ity mar­ket out­look

De­mand in the leisure seg­ment is ex­pected to in­crease from 2018 and be­yond, based on the re­form progam un­der­way in Saudi Ara­bia. Visa re­forms, in­clud­ing the up­com­ing im­ple­men­ta­tion of tourist visas, and the emerg­ing en­ter­tain­ment in­dus­try, are key fac­tors con­tribut­ing to this growth. In­ter­est in life­style prop­er­ties in both the 3- and 4-star cat­e­gories is grow­ing across the re­gion. Given its young pop­u­la­tion and ris­ing de­mand for leisure ac­tiv­i­ties, the King­dom of­fers sig­nif­i­cant scope for the de­vel­op­ment of life­style prop­er­ties that ap­peal to younger trav­el­ers.

With a raft of ini­tia­tives an­nounced and early suc­cesses achieved in just a few months, in­dus­try play­ers are eye­ing op­por­tu­ni­ties across the King­dom with great in­ter­est

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