The dawn of a new era
2017 marked the start of unprecedented growth phase for Saudi Arabia’s hospitality sector, buoyed by ambitious plans to invest billions in tourism infrastructure and attract more visitors to a kingdom with vast potential
Key points
2017 was a momentous year for Saudi Arabia’s hospitality sector
In 2017, the hospitality sector continued to develop at pace with new brands and concepts entering the market, harnessing the kingdom’s potential at a time of major growth for tourism and leisure.
Saudi continued to dominate the pipeline league table with the largest number of hotel rooms under construction in the MENA region. A hotbed of investment, there were 40,020 rooms across 89 projects in the construction pipeline according to STR. In addition, the total value of hospitality investment projects in Saudi Arabia was valued at US$1.9bn according to MEED Projects (source: SHIC press release)
Record openings in 2017
In 2017, a record 68 new hotels spanning 29,033 hotel rooms across KSA’s major cities opened their doors, with Riyadh, Jeddah, Al Khobar and Makkah the kingdom’s busiest areas for hospitality development, according to the TOPHOTELPROJECTS Saudi Arabia Hotel Construction Overview.
Religious tourism continued to grow, supported by investments in infrastructure
A large percentage of Saudi Arabia’s hotel pipeline focuses on the Holy Cities as economists are anticipating 30 million religious tourists by 2025. To keep pace with demand, the government is ploughing more than $82.7 billion (SAR310.16 billion) into projects that will boost the capacity of the Makkah Grand Mosque and main airport and improve access to the Holy Cities. The $26.6 billion Grand Mosque redevelopment is already under way, growing the site’s capacity from 600,000 to 2.2 million and enabling 400,000 pilgrims to perform the Tawaf, or circumambulation of the Kaaba, per hour. This is paving the way specialist hospitality concepts to flourish, including Makarem Hotels, which has showcased its authentic Saudi hospitality services – executed to international standards – to great success, in both Makkah and Medina. Makarem Hotels has found its niche by providing a unique Islamic hospitality offering with services that include a highly-trained spiritual concierge to help guide visitors during their religious journey.
From a macro-economic perspective, investor confidence in the hospitality sector was spurred by Vision 2030 plans, which started to make an impact in 2017 through:
a) The creation of a more attractive investment framework. The new Public Private Partnerships (PPP) drive started to lure more private investment into areas of the Saudi Arabian economy that have traditionally been financed by the public sector, including hotels.
b) The focus on tourism as a key economic growth sector going forward, with the industry now called Saudi’s ‘white oil’.
The tourism sector, which accounted for 10.2% of GDP in 2016, according to the WTTC, above the ME average of 9.1%, is a centrepiece of the kingdom’s diversification efforts and its Vision 2030 plan – the blueprint to prepare the biggest Arab economy for the post-oil era. International tourism receipts are forecast to grow by 5.8 percent per year between 2018 and 2022, according to a new report from BMI Research and the hospitality industry is a key beneficiary.
In tandem with Vision 2030 advancements, 2017 signalled the start of Saudi’s social and tourism transformation amid historic social change, led by Crown Prince Mohammed bin Salman.
• From a domestic tourism perspective, the development of entertainment opportunities in the country that were spearheaded by the Crown Prince laid the foundations for boosting domestic tourism, to the benefit of the hospitality sector.
• From an international perspective, with the goal of doubling annual tourist numbers to 30 million by 2030, the Crown Prince unveiled a number of game-changing projects in 2017, including NEOM and the Red Sea Project.
• Visas: And at the end of last year, SCTH President and Chairman Prince Sultan bin Salman bin Abdulaziz said preparations were afoot to launch electronic visas in the first quarter of 2018 to "all nationals whose countries allow their citizens to visit" the Gulf state. "The kingdom is a very big treasure," Prince Sultan said, describing its stunning landscapes. "We're not just oil traders."
As 2018 gets well under way, the future looks bright for Saudi’s hospitality sector. The multitude of hospitality investment opportunities arising in the Kingdom will be discussed at the upcoming Saudi Arabia Hotel Investment Conference (SHIC), which is being held under the theme of ‘Focus on the Future’. The event was hosted by strategic partner Dur Hospitality at the Riyadh Marriott Hotel on 26 February 2018, reflecting the firm’s role as a major player in the kingdom’s hospitality sector.
• The Saudi economy will witness a positive shift in the coming years when the government executes the recently announced initiatives bolstering confidence in tourism investments
• The Public Private Partnerships drive in Saudi Arabia will continue to present new opportunities to attract investment into hospitality.
• KSA Vision 2030 will continue to open the doors for private investor.
• While a large percentage of Saudi Arabia’s hotel pipeline focuses on the Holy Cities, hotel development will also be prompted by non-religious destinations, cultural cities and archaeological sites.
Companies with a strong track record in hospitality development in Saudi Arabia, such as Dur Hospitality, will thrive as a result of strong headway in 2017, meeting demand for quality hotel and serviced apartment concepts in strategic locations across the Kingdom.
