Hotel operators target Saudi Arabia for growth

Speaking this week at large travel conferences in Dubai, hotel operators such as Hilton, Jumeirah Group and Hyatt said they are actively looking to boost their portfolios in the kingdom as the industry benefits from improved infrastructure and a strong influx of religious tourists.

The government's active role in boosting tourism revenue is also a key draw, as the direct contribution of travel and tourism to Saudi Arabia's GDP is expected to reach $14.9bn, or 2.9% in 2012, up from $10.4bn in 2009, or 2.7%, at the peak of the financial crisis, according to the World Travel & Tourism Council.

Strong pipeline

Hilton Worldwide Middle East & Africa said this week that it has become the "fastest-growing hotel developer in Saudi Arabia" with a plan to open 14 hotels and almost 7,000 rooms in the kingdom in the next two years.

Six of the 14 pipeline hotels will be developed in Makkah, as part of the Jabal Omar development, aimed at tapping the increasing demand from the religious tourism sector.

"As a long-standing hotel operator in the kingdom, we understand the potential of the country's tourism market and our plans have been developed in line with the expected city-based expansion as well as to support the fledgling leisure and tourism industry," said Rudi Jagersbacher, president, Hilton Worldwide, Middle East & Africa.

Hyatt also announced ambitious plans for Saudi Arabia this week, touting seven hotels that are currently in its development pipeline in the kingdom, while Jumeirah Group Executive Chairman Gerald Lawless went on record saying his company is considering 'at least' seven hotel projects in the country.

And it is not just the large hotel chains that are looking to add rooms in the kingdom. Abdul Latif Jameel Real Estate Investment Company announced last month that it is investing ten billion Saudi riyals to develop new hotels in Makkah. The Saudi developer plans to pump in four billion Saudi riyals to construct 8,500 new rooms in a group of hotels expected to be delivered in five years and spend six billion Saudi riyals on the land. The company is also launching a new hospitality brand, Anjum Hotels, as the hotel operator, it said.

All of these operators are attracted to the huge growth potential in the country, where inbound visitor arrivals are forecast to grow from 13 million in 2010 to 15.8 million by 2014. The kingdom is focussing its efforts on providing the necessary travel infrastructure to boost tourism, with plans to spend more than $500m on expanding its existing airports and to splash out $7bn to build a new airport in Jeddah.

Focus on domestic, religious tourism

The vast number of hotel projects in the works means that Saudi Arabia will have one of the largest hotel pipelines in the world.

"I've seen figures which show that the whole of Saudi Arabia are scheduled to get about 66 hotels over the next five years, which will add 24,000 rooms," said John Podaras, Director, Christie + Co MENA. "In all likelihood you can discount 25% of that amount because some projects won't happen or if they do they'll take their time, but that is still a lot."

Podaras told AMEInfo.com that while Saudi Arabia's main cities are the logical place to invest and grow, he believes the real opportunities are in the kingdom's smaller towns such as Taif. "Personally, I'm interested in the secondary cities, because the emphasis of the Saudi tourism commission is on domestic tourism."

He noted that if anything, the country has taken a step backwards with regard to attracting international tourists and has made it even harder to get tourist visas, unless it is for religious tourism. "So the focus is on providing more amenities for Saudis so they won't go abroad and persuading the religious tourists to extend their stay," he said.

Podaras believes that any plans to boost non-religious international tourist arrivals are likely to stay on the back burner for a while. "Tourism brings a lot of challenges that Saudi Arabia probably isn't ready for," he said. "It takes time to develop a society that's able to cater to sectors that are so radically different to their own customs and cultures.

"And at the same time they have the population bomb that is slowly going off, so you have a massive increase of very young Saudis who need to be absorbed into the job market and who need housing and destinations to go to for their vacations," he continues. "So targeting foreign tourists might not be the first priority in light of that very immediate challenge."