NEWS l Hotel Industry

[Ahmad Rashid Ahmad]

Operators seek to cash in on Saudi budget boom

International and regional operators are seeking to cash in on a boom in Saudi Arabia's budget hotel market, according to experts.

Between now and 2014, around 1690 budget hotel rooms are expected to come online in Saudi Arabia, research by hospitality consultancy Christie + Co revealed.

This figure is based on the signed hotel pipelines of operators including Accor, Golden Tulip, HMH, IHG, Marriott and Rotana, among others. Taking into account the emergence of local Saudi Arabian management companies, the figure is expected to be higher in reality.

A quarter (25%) of Saudi Arabia’s hotel supply is currently in the three-star budget market — according to Christie + Co’s latest data.

“At the moment, 70% of the pipeline is still upscale,” said Philippe Baretaud, vice president, head of development for Europe, the Middle East and Africa, Accor.

Darroch Crawford, managing director, Premier Inn Hotels MEA added: “It’s an anomaly in the Saudi Arabian market and I think it’s going to change rapidly over the next three to four years".

He said the budget market was a lucrative one for hoteliers: “This sector offers exceptional returns on investment and the region is starting to realise this.

“In the last year or two, more people are identifying the success of budget brands and realising the returns are exceptional. The whole project cost is considerably less – from building to operating. It’s a very efficient business model and those people who put return on investments ahead of ego are getting returns very fast.”

Viability director Guy Wilkinson explained: “It’s been proven in several markets that the level of profitability is opposite to the number of stars. You have long-term value creation in a five-star product, where as in economy you’re looking for direct return on investment.

“ROI in the economy sector is exceptional – we have some running at 70% GOPPAR," Wilkinson added.

[Ahmad Rashid Ahmad]

10 BUDGET HOTELS OPENING IN KSA BY 2014

[Ahmad Rashid Ahmad]

Elaf Group to build 4 new hotels in Saudi Arabia

Saudi hospitality firm Elaf Group is to spend SAR400m (US$107m) on building four new hotels in the kingdom, it was announced on June 27.

The new properties, located across Jeddah, Makkah and Madina, are due for completion between 2012 and 2014, are part of Elaf’s plan to capitalise on the increasing number of tourists visiting the Gulf state.

The new hotels in Makkah will be called the Elaf Bakkah and Elad Al Kawthar, while the property in Jeddah will be named the Elaf Galleria.

Elaf did not provide any details on how many rooms each property will have, or any of their other facilities, although the firm has said it aims to double its total number of hotel rooms to 5,000 before the end of the year.

“These projects are part of our continuous efforts to address the demands of the increasing number of tourists visiting the kingdom,” commented Ziyad Bin Mahfouz, president of Elaf Group.

“We will remain steadfast in our commitment to support the government’s move to promote Saudi tourism and help the sector become a major contributor to the country’s economy,” he added.

Elaf currently operates 10 hotels across Saudi Arabia, primarily in the holy cities of Makkah and Madina, as well as the Red Sea port of Jeddah, which acts as a hub for tourists visiting the country on Islamic pilgrimages.

The company also offers travel services targeting those travelling to Saudi Arabia for Hajj and Umrah pilgrimages.

Prominent hoteliers are pouring investment into the burgeoning Saudi hospitality and travel market, with luxury US brand Hilton Worldwide earlier this week revealing plans to hire 10,000 new employees in the country over the next three to four years.

Additionally, Fairmont Hotels and Resorts is due to open its 1,487-room Swissotel Makkah, which will become the largest hotel in the world, at the start of Ramadan. The company also says it plans a further 12 properties in Saudi Arabia and plans to take on 10,000 new staff.

At the other end of the spectrum, Accor says it hopes to open between 10 and 15 of its budget ibis properties in the other country. The brand is set to make its debut in Riyadh in December, followed by Yanbu early next year.

Saudi Arabia's 951 or so licensed hotels recorded occupancy rates of 63 percent in 2011m, compared with 59.2 percent the year before, according to a report published by the Saudi Commission for Tourism and Antiquities last month.

[Ahmad Rashid Ahmad]

Wyndham signs deal for 20 budget hotels in KSA


The Super 8 economy lodging hotel brand

Wyndham Hotel Group on Wednesday signed a master franchise agreement with Saudi Automotive Services Company (SASCO) to develop 20 budget hotels in Saudi Arabia over the next five years.

The introduction of the Super 8 economy brand aims to meet the needs of the domestic tourism sector in the kingdom, estimated at 24 million people last year, the company said in a statement.

Super 8 has more hotels than any other economy lodging chain in the world, with over 2,200 properties throughout the US, Canada and China.

The introduction of the brand into the Middle East comes just months after an announcement at the International Hotel Investment Forum (IHIF) in Berlin about the Super 8 brand's launch in Germany.

Special features specifically developed for guests in the Middle East and Africa include larger family rooms which include adjacent living space, the statement added.

"Super 8 is a convenient and trusted highway hotel brand, which makes it ideal for the long highways and the volume of car journeys in this market," said Bani Haddad, Wyndham Hotel Group's regional vice president for Middle East and Africa.

"With expertise in automotive and roadside services, SASCO is the ideal collaborator to bring the brand into this market, and we believe the relationship between Super 8 and SASCO will ultimately be of benefit to road travellers throughout the kingdom."

SASCO is the largest petrol station operator in Saudi Arabia. Sultan Alhudaithi, its managing director, said: "we believe aligning with Super 8 provides an excellent opportunity to bring something new to the market.

"Having launched our innovative new petrol station design two years ago, adding lodging for our customers in the form of the internationally renowned Super 8 brand is a natural step."

The Super 8 brand was established in 1974 in South Dakota and was acquired by Wyndham Hotel Group in 1993.

[Ahmad Rashid Ahmad]

Hotel Expansion Surges in Saudi Arabia as Mecca Goes Upscale

The pilgrimage starts with a private jet to an exclusive airport in Saudi Arabia, where passengers are treated to a buffet while travel-company employees process their immigration documents. The visitors are then taken in air- conditioned cars and buses to the InterContinental Hotel overlooking the Grand Mosque in Mecca.

“We try to make it a little more comfortable for our clients, that’s all,” said Abdulrahman Mohammad Al-Shaya, a sales executive for Kuwait-based Al Marwa. The company offers wealthy pilgrims a seven-day package for the Hajj, the Islamic pilgrimage every able-bodied Muslim is obliged to make, for about 5,500 Kuwaiti dinars ($19,800).

Rising wealth in Islamic countries from the Persian Gulf to Indonesia is boosting demand for a higher standard of accommodation as about 3 million pilgrims prepare to descend on Mecca for the annual Hajj in October. That’s contributing to a surge of hotel investment in Saudi Arabia by companies including InterContinental Hotels Group Plc, Hyatt Hotels Corp. and Starwood Hotels & Resorts Worldwide Inc.

Hilton Worldwide Inc., owned by Blackstone Group LP, plans to more than double the number of hotels it operates in the country to 14, including six in Mecca. It currently runs six in Saudi Arabia. U.K.-based InterContinental will increase its room numbers by about 50 percent to 7,300 in the next three to five years. Hyatt, whose only Saudi hotel opened in 2009, expects to have eight more in five years.


Starwood Expands
Starwood, the Stamford, Connecticut-based owner of the luxury St. Regis and W brands, has plans to manage five more hotels, adding about 1,300 rooms. It currently has 10 hotels with about 3,000 rooms.

The boom in Saudi Arabia will increase the number of branded hotel beds available by 58 percent in the next few years, research company STR Global estimates. While international companies can operate hotels in Saudi Arabia, they are not allowed to own property in the country.

“The tourism industry in Saudi is rapidly expanding and our development plans reflect the growing demand for high- quality hotels in that market,” said Christophe Landais, Middle East managing director for Paris-based Accor SA. “The kingdom constitutes a strategic base for us.”

Accor, Europe’s largest hotel operator, will open a 1,315- room Pullman hotel in Mecca and another property in the south of the kingdom, Landais said. The Paris-based company plans to increase its properties in Saudi Arabia to 17 by 2015 from 12 today.

Clock Tower
The Abraj Al-Bait Towers, a hotel complex across from Mecca’s Grand Mosque, transformed the ancient city’s skyline when it was completed in 2010. The 601-meter (1,972-foot) clock tower at its center houses an 858-room Fairmont Hotel. Swissotel plans to open a 1,562-room hotel in the complex this year, according to the company’s website. Both hotel operators are part of Colony Capital LLC’s FRHI Holdings Ltd.

Local companies are tapping the growing market as well. Saudi Hotels and Resorts Co. has 10 hotels across the kingdom and plans to add four in Mecca, Jeddah and Medina within a year. Makarim Group, which manages the hotels, isn’t worried about competition from foreign operators, marketing director Majdi Saqer said by e-mail. “There will always be demand for local- flavor five-star hotels,” he said.

Average daily rates in Mecca hotels rose 15 percent to 631.79 riyals ($168) in the first three months of 2012 while falling 2.7 percent in Riyadh. Revenue per available room in Mecca jumped 43 percent to 403 riyals in the first quarter compared with a 10 percent drop to 638 riyals in Riyadh, according to STR Global.

State Investment
Rising wealth in parts of the 1.57 billion-strong Muslim world isn’t the only force driving hotel growth in Saudi Arabia. A $500 billion Saudi government spending program on homes and infrastructure is lifting demand for short-term accommodation from foreign consultants, engineers and other professionals who stay in cities such as Riyadh and Damam, according to real estate broker Jones Lang LaSalle Inc.

Resort-style tourism of the type offered in neighboring United Arab Emirates is shunned by Saudi Arabia, a conservative kingdom that strictly enforces Islamic laws such as a segregation of men and women and a ban on alcohol.

About 53,000 branded hotel rooms are currently available across the kingdom, about the same as the city of Dubai, according to STR Global. Those mostly provide five-star rooms with a few in the four-star bracket. About 19,000 are in Mecca and another 13,000 in Medina.

Furnished Apartments
Most pilgrims stay in furnished apartments, mainly supplied by individuals and small businesses, said Chiheb Ben Mahmoud, head of hotel advisory for the Middle East and Africa at Jones Lang LaSalle. That’s also the most common type of accommodation for professionals in cities like Riyadh and Jeddah and holiday travelers in the south of the country.

“The practice of camping and unauthorized accommodation does exist,” he said. “Every year, the Saudi authorities crack down on it while trying to be sensitive because of the religious motive for the trips.”

Religious visits including the Hajj and Umrah pilgrimages and trips to Medina, the resting place of the Prophet Mohammed, still dominate Saudi Arabia’s tourism industry. Last year, the country hosted 10.6 million pilgrims and religious visitors out of 15.4 million foreign arrivals overall, according to Business Monitor International. BMI estimates arrivals will increase by an average 6 percent annually until 2016.

Record Hajj
The Saudi Ministry of Hajj says it expects a record number of pilgrims this year. In 2011, 2.5 million passed through Jeddah’s airport on 10,650 flights.

“There is some kind of a catch-up in terms of capacity building,” Jarmo Kotilaine, the Jeddah-based chief economist at National Commercial Bank, said by phone on June 14. “There has been a long period when there was very little addition.”

Rising visitor numbers only tell part of the story. The government’s drive to improve health and safety standards in Mecca and Medina during the Hajj is triggering demand for hotels by discouraging the centuries-old practice of accommodating pilgrims in people’s homes, said Jones Lang’s Ben Mahmoud.

“Branded hotels, regional or global, currently form the backbone of inventory in Mecca,” Ben Mahmoud said. “The trend will continue as stricter guidelines for health and safety are implemented and because a higher standard of comfort is being demanded by pilgrims.”

Muslim Wealth
The market for a better class of accommodation is being fuelled by economic growth in Muslim-majority countries. Turkey’s economy expanded 8.5 percent last year, the third-most among Group of 20 nations after China and Argentina. Indonesia, the world’s most populous Muslim nation, grew by 6.5 percent, the most since the Asian financial crisis that ended in 1998.

“While most of the high-quality hotel supply has been five-star and four-star, Accor is seeing the emergence of real demand for other products like the economy three-star segment,” Landais said. “For the moment, that’s only fulfilled by local and unbranded hotel supply that lacks high quality standards most of the time.”

International hoteliers are also seeing opportunities in smaller cities such as Jizan, Yanbu, Khobar, Jubail and Hofuf, he said.

Mecca was a destination for religious devotion for centuries before the Prophet Mohammed’s birth in the 6th century. The Hajj is one of the five pillars of Islam and every able bodied Muslim in the world is obliged to make the journey at least once in their lives, performing rituals like circling the cube-shaped Kaaba and sprinting between the hills of Al Safa and Al Marwa seven times. Pilgrims must spend a day on Mount Arafat and sleep a night at Muzdalafa along with millions of others.

‘Unique Market’
“I wish I could have more hotels in Mecca,” said Jan Smits, InterContinental’s chief executive officer for Asia, Middle East and Africa. “In four months, you make 70 percent of your income. It’s a really strong market and it’s one of the most unique in the world.” The company has been in the country since the 1970s and operates one the hotels closest to the Grand Mosque.

Staffing tends to be the biggest challenge for hotel companies expanding in Saudi Arabia, according to Moustafa Said, a lawyer for Clyde & Co. who advises operators and owners in the kingdom. Securing visas for hotel workers can be a long and laborious process and government quotas for hiring Saudi nationals are hard to meet because many see the work as menial, he said. Non-Muslims are barred from entering Mecca and Medina.

“There are obviously very qualified general managers and staff who are Muslim, but the fact that you are limited to a single religion makes things more difficult,” said Said, who is based in Abu Dhabi.

Pricing Cap
The Saudi Commission for Tourism & Antiquities, which regulates the industry, has also introduced unpopular rules such as pricing caps that may damp investment by limiting return, according to Said.

The obstacles aren’t deterring hotel operators so far as slowing economic growth stifles expansion in other countries. Saudi Arabia, holder of the world’s second-largest oil reserves, has the capacity to spend to expand its economy even after crude prices slid this year.

“The economic fundamentals look pretty good,” National Commercial Bank’s Kotilaine said. “There are good growth prospects and economic resilience. Although it may seem like a more challenging market from the prospective of a new entrant, I think it’s a more receptive market.”

[Ahmad Rashid Ahmad]

Jeddah hotel occupancy rate hits three-year high

Hotels in Jeddah witnessed a nine percent growth in occupancy during May to hit their highest point in three years, according to the latest HotStats survey of full service hotels by TRI Hospitality Consulting.

Average occupancy at four and five star chain hotels in the city reached 82.9 percent with average room rates (ARR) increasing 11.8 percent to $220.15 during the month, compared to the same period last year.

Revenue per available room (RevPAR) for the month surged 25.5 percent to $182.58 leading to strong growth in profits, the index showed.

Peter Goddard, managing director of TRI Hospitality Consulting, said: "Jeddah hotels continue to experience increasing demand with occupancy levels reaching their highest point in the past 36 months, providing Jeddah's hoteliers with an opportunity to increase average rates and improve overall yields.

"The strengthening of average rates, occupancies and RevPAR has funnelled directly through to the profitability of the hotels," he added.

By contrast, Riyadh hotels witnessed a decline in occupancy, achieving 67.3 percent occupancy in May, 3.3 percent lower than the same month last year.

Despite a drop in ARR by 4.6 percent to $255.33, Riyadh reported the highest ARR out of the six cities surveyed.

Goddard added: "The drop in occupancy levels of hotels in Riyadh for May indicates the start of the annual summer slowdown when corporate activity reduces before the summer holidays.

"Historically occupancy levels fall to levels below 40 percent during the summer months as corporate demand falls or shifts to Jeddah as a result of the relocation of the King's Court.

"We anticipate a further reduction in rates in Riyadh in the coming months as hotels try to capture the remaining demand and maintain profitability."

[Ahmad Rashid Ahmad]

Best Western debuts in Riyadh with Orchid Hotel


Lobby at the new Best Western Orchid Hotel

Best Western International has launched its debut property in Riyadh, as part of its Saudi Arabia expansion plan.

The 10-storey Best Western Orchid Hotel features 86 rooms and suites, as well as an all-day dining restaurant, 24-hour business centre, meeting rooms and fitness centre.

Glenn de Souza, Best Western International’s vice president international operations – Asia and the Middle East, said: “We are delighted to announce the opening of the Best Western Orchid Hotel – our debut in yet another major capital city in Saudi Arabia.”

“Best Western International foresees a bright future for Saudi Arabia. With a fast-growing economy driving the business travel sector and pilgrimage traffic that is going from strength-to-strength, demand for hotel accommodation in the Kingdom will grow exponentially in the next decade. And with more than 1,500 comfortable, convenient hotel rooms expected coming on line by 2015, Best Western International will be at the forefront of this exciting country’s travel and tourism boom.”

Best Western International first entered the country with Best Western Plus Sand Rose Suites in Al Khobar in February, which featured 12 guestrooms and 36 suites.

[Ahmad Rashid Ahmad]

Dewan to design luxury Dammam hotel


]New five-star hotel designed by Dewan for Arab Resorts Area Company in Dammam

Dewan Architects & Engineers has been awarded a contract to design and build a five-star hotel at Dammam in Saudi Arabia.

The firm has won the commission from Arab Resorts Area Company (ARAC).

The hotel will contain 200 rooms and 120 apartments as well as a 600-capacity banqueting hall, four restauarants, a business centre, gym, spa and a kids' club area.

Ammar Al Assam, executive director of Dewan, said: "The economy of Saudi Arabia is developing rapidly and there is a great demand for luxury leisure destinations within the kingdom.

"ARAC's foray into the luxury hospitality sector with this project is an excellent opportunity for Dewan to further consolidate our already strong presence in Saudi and contribute towards the development of the country."

The company said that its design concept for the building "focuses on contemporary and functional design parameters". It also said that areas within the hotel will "invoke the spirit of Arab hospitality and create a sense of belonging".

The hotel will be built along the Prince Turki Highway, which is ten minutes from Dammam's 1st Industrial City and 45 minutes from Dammam International Airport.

Dewan Architects has offices in the UAE, Saudi Arabia, Iraq, Qatar, India and the Philippines, Its work in th region includes the Abu Dhabi Vicreoy Yas Hotel, the Dijbouti Kempinski and the Fairmount Resort in Abu Dhabi.

[Ahmad Rashid Ahmad]

Al Faisaliah Hotel North unveils new royal lobby



The lobby of the five-star Al Faisaliah Hotel North, a Rosewood Hotel, has reopened following a refurbishment.

Designed by Her Highness Princess Al Anoud, CEO of Al Dar Design Company, the new lobby features a clean and contemporary design.

Her Highness explained the inspiration for the design: “This is one of the most popular hotel lobbies in Riyadh so it was important to understand how guests interact with the space at various times of the day”.

“Our main goal was to maintain the welcoming spirit of Al Faisaliah Hotel while ensuring the visual language of the space was consistent with that of Al Faisaliah Hotel South lobby”.

In addition to the décor, Al Faisaliah Hotel North also introduced a new food & beverage menu. Theobby menu now includes a caviar menu from world-renowned caviar house Prunier.

Erick Steinbock, regional vice president, Rosewood Hotels & Resorts and managing director of Al Faisaliah Hotels said: “Al Faisaliah Hotel is renowned for its luxury and personalised service in every corner of the hotel”.

“We are delighted to be enhancing our guest offering with the evolution of the highly popular lobby into a dynamic, contemporary but no less luxurious new meeting place”.

[I Know]

more budget properties are needed with a good standard

[Ahmad Rashid Ahmad]

Yep, brands like Holiday Inn, Holiday Inn Express, Super 8 etc. are opening up in KSA....

[Ahmad Rashid Ahmad]

Best Western to open luxury MidEast hotels



Best Western International, which operates three hotel brands, is set to open its first luxury properties in the Middle East by the end of the year.

The company, which already operates two midscale hotels in Saudi Arabia and one in Qatar, will launch Best Western Premier in Kuwait and Oman.

Both the 96-room Best Western Mahbola in Kuwait and the 212-room Best Western Premier Muscat in Oman are scheduled to open in Q4, 2012.

Best Western International vice president international operations, Asia & the Middle East, Glenn de Souza, said the company was looking for further opportunities in the region.

“The Middle East is a fast-growing market and Best Western never stops looking for opportunities to expand its portfolio. If we find good partners and strong development opportunities in other countries, we will certainly look to expand our regional portfolio further,” said de Souza.

Construction has started on two Best Western Premier properties in Erbil, Iraq, which were signed in November 2011 with owner Golden Mountains Company.

The 82-room Best Western Premier Erbil Airport will be the first to open in 2013, located near to the recently-opened Erbil International Airport.

This will be followed by the opening of the 160-room Best Western Erbil in the city centre in the first quarter of 2014.

“Iraq was chosen for Best Western’s next step of brand expansion in the Middle East based on various positive aspects of the nation. These include the historical values, the country’s economy, the people and its financial resources, all of which are key elements in the immense potential of Iraq as both a major business centre and tourism destination. And Erbil, as a prominent trading centre with key road links and increasing air access, is a natural choice for our first hotels in Iraq,” said de Souza.

Meanwhile, Best Western is also planning to expand in Saudi Arabia, where it recently opened the Best Western Plus Sand Rose Suite Hotel in Al Khobar and the Best Western Orchid Hotel in Riyadh.

In the next two years, Best Western International expects to open nine new hotels in seven cities across the Kingdom, adding 1,589 rooms to the country's inventory.

Worldwide, Best Western International operates 4,000 hotels in 100 countries.

[I Know]

What about the likes of Ibis, or other no frills service providers?

[Ahmad Rashid Ahmad]

Couple of Ibis hotels are U/C in KSA...

[Ahmad Rashid Ahmad]

Ramadan brings big boost to Saudi hotels

Pilgrims flocking to Grand Mosque, Makkah, Saudi Arabia have boosted performance of local hotels.

Ramadan impacted hotel performance across the Middle East in July with holy cities in Saudi Arabia seeing major increases in revenues, latest industry figures show.

STR Global said hotels in Makkah reported the biggest boost to performance with revenue per available room (RevPAR) increases of more than 90 percent compared to July 2011.

“Ramadan, which took place 20 July to 19 August, impacted the results across the Middle East”, said Elizabeth Randall Winkle, managing director of STR Global.

“Ramadan took place during August last year. The holy cities of Makkah and Madinah reported RevPAR increases of 90.9 percent and 33 percent, respectively."

Saudi city Jeddah also witnessed the largest rise in average daily rates (ADR) with a 7.9 percent increase to $228.98.

Jeddah was also the only key market in the Middle East and Africa region to report a RevPAR increase, rising 12.7 percent to $191.53.

Overall, the Middle East/Africa region reported mostly negative performance results in July.

The region’s occupancy decreased 4.9 percent to 56.7 percent during the month, its average daily rate increased 2.1 percent to $140.67 and its revenue per available room fell three percent to $79.72.

Beirut ended the month with the largest decreases in all three key performance metrics.

Its occupancy fell 19.3 percent to 53.9 percent, its ADR was down 25.2 percent to $195.78 and its RevPAR decreased 39.6 percent to $105.48.

Overall, hotels in Saudi Arabia saw occupancy rates slip 1.6 percent to 64.6 percent in July while RevPAR rose 31 percent and ADR rose 33 percent.

STR Global data also showed that hotels in the UAE witness a near-15 percent drop in occupancy to 60.5 percent in July, while RevPAR fell by 12.7 percent but ADR rose by 2.4 percent.

[I Know]

where in Ksa are they planned for?

Originally Posted by Ahmad Rashid Ahmad

Couple of Ibis hotels are U/C in KSA...

[Ahmad Rashid Ahmad]

Originally Posted by I Know

where in Ksa are they planned for?

Ibis Riyadh & Ibis Yanbu will open this year while Ibis Jeddah will open in 2014...

[I Know]

Thats good, maybe they will roll out others soon too

[Ahmad Rashid Ahmad]

Yep, Accor is expanding very quickly in KSA...

[I Know]

They need to look at areas where this will fill market demand rather than the citys that already have ample rooms