Riyadh hoteliers remain pessimistic regarding business performance for the rest of 2017 but are nonetheless more positive on the medium to longer horizon, real estate consultancy Knight Frank said.
Hotel market performance in Riyadh, after years of relatively, began to decline sharply in 2015 when crude oil prices first began to fall and corporate visitation declined, and this trend has continued throughout the first half of the year, Knight Frank said in its latest hospitality review.
“Corporate markets and business tourism remain the largest sources of demand for hotels in Riyadh. While internationally branded hotels remain the preference of corporate guests, there have been increasing instances of major corporate entities renting units within residential compounds for their employees to use on an ad-hoc basis due to the security, affordability, space, and facilities on offer in relation to traditional hotel accommodation,” it said.
This scenario is however offset by various development initiatives in the capital, including plans for two megamalls and the recently announced 334-square-kilometer Entertainment City which will house sports, cultural and recreational facilities including a safari and a Six Flags theme park.
The kingdom’s Public Investment Fund will be the main investor in the project, which will break ground next year and start operations in 2022.
These developments will help boost leisure demand particularly from the domestic sector, Knight Frank said.
“The tourism industry is seen to be one which can be a major source of employment for young Saudis, with an additional 375,000 hospitality related jobs anticipated by 2020. By diversifying the demand profile of potential guests to the capital, sustained demand growth can be stimulated in the medium term, which will in turn create additional employment for the domestic market,” it added.
Over in Jeddah, Knight Frank said the area’s hospitality market has been facing challenging conditions, both from a demand and supply perspective.
“In terms of demand, a more price sensitive guest profile has resulted in a flight to affordability. While looking at supply, the recent influx of keys as a result of the materialization of delayed projects has resulted in rate compression,” it said.
“Given the fact that much of the supply in Jeddah is aging and of poor quality, development opportunities lie in the establishment of quality internationally branded midscale offerings,” it said.
The government in August announced plans to transform a 200-kilometer stretch of the Red Sea coastline into a luxury, with the initial investment to be provided by the Saudi Public Investment Fund. Ground breaking has been scheduled to start in 2019.
Virgin airlines founder Richard Branson has committed to invest in the tourism development, the first international investor to do so, during a visit to the Kingdom.

Source:Arabnews