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Jeddah, Makkah and Medina lead Saudi hospitality sector growth

Religious visits are among the main drivers for the tourism industry in the kingdom

Three Saudi cities, Jeddah, Makkah and Medina led the positive growth of the kingdom’s hospitality sector in December 2014, according to recent reports.

Saudi Arabia’s hospitality sector reported positive performance results during December 2014, says research firm STR Global.

“In Saudi Arabia, Jeddah specifically has had an overall successful end to 2014 and continues to improve its reputation as a destination for business and leisure,” says Philip Wooller, area director for the Middle East and Africa at STR Global.

Wooller made his remarks during the Arabian Hotel Investment Conference held in Jeddah this week.

He confirms the demand growth in Saudi Arabia was able to increase 2.9 per cent for year-end 2014, while the supply increased by 1.9 per cent.

“This resulted in positive occupancy growth achieving a level of 74.3 per cent occupancy for the year,” says Wooller.

Wooller elaborates: “Room rates also achieved an increase of 8.9 per cent to SAR968.73 for year-end, which resulted in a RevPAR increase of 9.9 per cent. 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),” he adds.

Jeddah is currently witnessing consistent demand and delays in new supply to stabilize the market, according to real estate company, Colliers International.

Colliers International’s recently launched MENA Hotel Market Forecast expects the occupancy rate will reach 76 per cent, ADR $262, RevPAR $200, and YoY RevPAR of 2 per cent over the next 12 months.

As for the two holy cities of Makkah and Medina, Wooller says: “Looking at the holy cities of Makkah and Medina on a 2014 year-end basis, they achieved RevPAR increases of +4.3 per cent and +8.6 per cent respectively.”

“Medina also reported a significantly higher year-end occupancy growth (+9.8 per cent) compared to Makkah’s +5.8 per cent,” adds Wooller.

Religious visits are among the main drivers for the tourism industry in Saudi Arabia.

“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,” he adds.