KSA has moved to market itself as a global tourism destination with speed and ambition. Philip Wooller, area director, Middle East & Africa at STR, and speaker at the recent Saudi Arabia Hospitality Investment Conference in Riyadh, tracks the Kingdom’s achievements to date and plans for the future in an operating climate now facing unprecedented challenges.
The world is currently dealing with the biggest challenge of our times and nowhere has this been felt more acutely than in travel and tourism. As we consider the current situation, however, it is also important to reflect on the significant changes that Saudi Arabia is implementing and remember that despite the drastic but necessary measures taken, the Kingdom is still busy preparing for a new era as a highly attractive destination for global tourism.
The KSA, the region’s largest outbound tourism market, has sharpened its focus on further developing the country’s tourism offerings of late. The recent boom in its tourism sector comes as a result of Saudi Vision 2030, a strategic masterplan encompassing a wide range of social and economic reforms across a multitude of sectors, aimed at reducing the country’s dependence on oil and diversifying into more sustainable sources. A number of ambitious megaprojects have taken shape since that launch, led by NEOM, the USD 500 billion megacity of the future, the Red Sea Project on the Western Coast, the entertainment megaproject to be rolled out in Riyadh named Qiddiya and a new cultural tourism destination called The Diriyah Gate. To support its drive, in 2019, the Kingdom relaxed its entry visa rules, enabling citizens from 49 countries to apply for a visa on arrival or make an online e-visa application.
Since 2016, when Vision 2030 was first announced, the Kingdom’s hotel industry Saudi Arabia Top 10 Brands Pipeline – Jan 2020 has witnessed renewed interest, with a number of international and regional brands taking steps to expand their operations. Looking ahead to 2025, AM:PM, STR’s digital hotel supply and pipeline monitoring tool, expects 79,864 rooms to be added across the country to the existing inventory. The majority (34,270) will be located in the Holy City of Makkah, which attracts millions of pilgrims every year, primarily for Hajj and Umrah. Riyadh and Jeddah look set to increase volumes by 11,632 and 14,525 respectively over the same five-year period. The three brands with the highest number of rooms in the pipeline are Voco (4,881), Hilton Garden Inn (3,988) and Millennium (3,906).
Hotel performance has fluctuated in Saudi Arabia, with hoteliers doing their best to navigate changing market conditions, regional instability, shifts in oil prices, differing levels of government spending and new visa regulations. Hotel revenue per available room (RevPAR) for the country dropped 10 percent in both 2016 and 2017, after declines in oil prices prompted a widespread fiscal shock to the oil-dependent GCC member states. The rate of decline in RevPAR has since slowed considerably to -5.1 in 2018 and -2.5 in 2019, primarily because of decreases in average daily rates (ADRs), with occupancy rebounding 5.4 percent in 2019. Riyadh hotels enjoyed a bumper year in 2019, with RevPAR growth of 5.2 percent due to a 9.2 percent increase in occupancy and 3.6 percent decline in ADR year-on-year. On top of the steady flow of business travelers visiting the country’s capital city and primary business hub last year, demand was further boosted by a number of high-profile events. These included the Future Investment Initiative in October, the Formula E Grand Prix in November and the boxing rematch between Anthony Joshua and Andy Ruiz in December. Other successful events running in parallel as part of the Riyadh Season Festival, which opened in October, brought additional benefits. Fourth-quarter RevPAR in Riyadh reached 529.33 SAR (USD 141.15), the highest since 2014. With more events in 2020, such as the Rally Dakar, held in January, and the G20 summit scheduled for November, Riyadh is expected to continue its successful run.
Meanwhile, all eyes are peeled on the progress of recent reforms, and anticipation is high for the completion of the first phases of the mega projects that are underway—all deemed essential for Saudi Arabia to fulfil its great potential and huge promise to its citizens and the rest of the world.