Saudi hotels see occupancy and rates decline in Q1
Saudi Arabia’s hospitality sector continued to show signs of a slow down during Q1 2016 due to a sustained decline in oil prices and a slowing demand from the corporate sector. Nevertheless, new hotel establishments entered the market during the quarter, while a number of new properties across all hotel segments were launched.
According to a third party industry report, occupancy rates across the hospitality sector in Jeddah stood at 68 per cent year-to-February 2016, compared to 73 per cent registered during the same period in 2015, while average daily rate (ADR) indicators recorded a year-on-year decrease of 5 per cent with average rates standing at SR858.75 ($228.7). Currently the five-star hotel segment represents more than half of Jeddah’s total hotel stock, with the majority of the upcoming supply also falling into the same category.
The new hotel supply, which is expected to enter the market over the next couple of years, coupled with a declining demand across the corporate sector as a result of the lower oil prices, are likely to exert downward pressure on all industry key performance indicators (KPIs) in the short term.
The decline in oil prices has also impacted the hospitality market in Riyadh, where more than two-thirds of all hotel bookings are generated by the corporate sector. As a result, occupancy rates registered in the capital stood at 62 per cent year-to-February 2016, compared to 64 per cent during the same period in 2015. ADR figures also indicated a year-on-year 10 per cent decrease reaching SR847.5 ($225.7). The increasing demand for mid-market accommodation is likely to prompt many developers to address the current market gap for internationally branded three-star properties.
Unlike Riyadh and Jeddah, the hospitality sectors in the two holy cities of Makkah and Madinah have been impacted to a lesser extent by the declining oil prices due to the religious significance of both destinations. However, limited pilgrimage visa quotas, a drop in the number of Iranian pilgrims and major ongoing redevelopments resulted in dips in occupancy levels in Q1 of 6 per cent in Makkah and 8 per cent in Madinah respectively. It is expected that once the pilgrimage visa quotas are lifted in 2017, all key performance indicators will gradually begin to recover and record positive growth rates.
With regards to recent additions to the hotel establishments’ supply in Saudi Arabia, Q1 witnessed the inauguration of a number of hotel establishments including the 129-key Citadines Al Salamah Jeddah serviced apartments, 191-key Millennium Hotel Hail and ‘V’ Hotel Jeddah (Jeddah-based SISBAN Holding’s first boutique hotel).
Based on recent market announcements, notable projects that were launched during the first quarter included the 172-key Ascott Corniche Al Khobar (opening: mid-2018), the 180-key Swissôtel Al Khobar (opening: 2019), the 100-room Swiss-Belhotel Al Khobar (opening: end-2016), the 250-key Embassy by Hilton Riyadh King Fahd Road (opening: 2019), the 189-room DoubleTree by Hilton Dhahran – Al Qusur (opening: TBC), the 611-key Aiana Makkah (opening: Q3 2016), the 230-key Radisson Red Makarunah in Jeddah (opening: Q2 2018) and the 84-room Park Inn by Radisson Madinah Road (Q1 2017).
Furthermore, Australian hotel management company StayWell announced plans to operate its first two Park Regis properties in Makkah. The two hotels will feature 286 and 344 guest rooms respectively and are both slated for completion in Q2 2018.