Religious tourism to drive new Saudi Arabia hotel openings

Saudi Arabia is expected to have a steady stream of new hotel openings over the next five years amid a jump in pilgrim numbers as part of its 270 billion riyal (Dh264.43bn) National Transformation Plan.

The kingdom wants to increase the number of Haj pilgrims to 2.5 million by 2020 from 1.5 million and more than double Umrah pilgrims to 15 million from 6 million, according to the plan revealed last week. Saudi Arabia also wants to boost tourism spending by two-thirds to 174.8bn riyals from 104.8bn riyals.

“Although currently there are no definitive plans available regarding where the additional revenue will be spent, we expect that the priority targets will include expansion of tourism infrastructure in the country, training Saudi workforce to participate in the growth of this sector, and developing and upgrading tourism facilities across the country,” said Rashid Aboobacker, the associate director at TRI Consulting, in Dubai.

The plan envisages raising the number of hotel rooms and apartments by about 40 per cent to 621,000 from 446,000.

A total of 49,259 rooms from 130 hotels across various market segments from local and international brands are under development in Saudi Arabia as of April, according to Tophotelprojects. Most are expected to come on stream by the end of 2021.

“There is a gap in demand and supply and that is why you see so much of hotel construction,” according to Francis Dharmai, the head of tourism and regional general manager for Arabian Gulf region at Saudi Arabia’s Al Tayyar Travel Group.

The Riyadh-listed company has invested in Muthmerah Real Estate Investment Company and Thakher Investment and Real Estate Development Company last year to develop hotels and mixed-use real estate projects.

Its five-star 759-room hotel in Mecca is expected to be ready after renovations next year.

Abu Dhabi-based Rotana expects to add 1,400 rooms by 2017 with six hotels in Riyadh, Jeddah, Dammam and Al Khobar. Currently, it operates five-star properties in Mecca and Riyadh with a total of 720 rooms.

It expects to open Centro Shaheen in Jeddah in the next quarter and Centro Waha in Riyadh in the last quarter.

Rotana started off capturing the passenger traffic in the country through a property in Mecca, thanks to a boom in religious tourism, said Omer Kaddouri, the president and chief executive.

“The time has now come to penetrate other prime destinations such as Jeddah, Al Khobar, Dammam and the capital, Riyadh,” he said.

Starwood Hotels and Resorts expects to double its portfolio in the next five years and last week signed two new properties in Riyadh with Saudi Real Estate Company (Al Akaria). Scheduled to open in 2022, The Westin Riyadh and Element Riyadh have a total of 632 rooms.

Saudi Arabia is Starwood’s second largest market in the Middle East after the UAE with 10 hotels and 4,000 rooms. Starwood, which entered the country in 1978, has properties in Riyadh, Jeddah, Dammam, Mecca, Medina, Al Khobar and will enter Dhahran and Unaizah.

Tourism is considered a priority sector thanks to its huge employment potential for Saudi nationals in the private sector.

The plan aims to create 370,000 additional direct jobs in tourism and the national heritage sector by 2020, reaching 1.2 million jobs.

The Saudisation goal for hotels is 35 per cent, according to the Saudi Commission for Tourism and National Heritage.

Starwood currently employs 3,000 people in Saudi Arabia and expects to grow the number to 8,000 in the next five years.

Abu Dhabi’s Rotana expects to add 1,000 job opportunities in Saudi Arabia with the new openings.

The current Saudisation rates of Starwood and Rotana were not available.

Read the full text of the National Transformation Plan here.

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