Saudi hospitality market outlook stays positive: Deloitte
Although the Saudi Arabia’s hospitality market experienced a challenging year in 2019 compared to previous years, the long-term outlook for the market remains positive, said professional services firm Deloitte in a new report.
“The Middle East Real Estate Predictions: Saudi Arabia Hospitality Market 2019” report launched by Deloitte Financial Advisory examines the performance of the Saudi Arabia hospitality market, the evolution of the tourism industry in Saudi Arabia and a regional view of global trends and disruptors.
Key findings from the report include:
The overall performance in Makkah improved compared to the same period last year. Occupancy saw a 10 per cent increase, reaching 68 per cent in the first half of 2019, however the increase in supply continued to put pressure on ADRs which witnessed an 8 per cent decline over the same period. The combined effect resulted in an increase in Revenue Per Available Room (RevPAR) by 1 per cent.
The hotel market in the Dammam and Al Khobar region saw a 10 per cent increase in occupancy, in the first half of 2019, compared to the same period last year. However, ADRs continued to soften, with a 17 per cent decline over the same period, resulting in an overall decline in RevPAR of 8 per cent.
Average occupancy levels in Riyadh saw a 5 per cent increase compared to the same period last year, whilst increasing supply and competition led to a reduction in ADR by 10 per cent, over the same period, resulting in a decline in RevPAR of 6 per cent.
While occupancy levels in Jeddah remained stable, increasing supply and competition continued to drive reductions in ADR and consequently RevPAR, which saw a decline of 11 per cent in the first half of 2019, compared to the same period last year. Notably, in 2018, Jeddah reported the highest ADR globally according to data from STR.
Dunia Joulani, head of Travel, Hospitality and Leisure, Deloitte Middle East said, “Overall the long-term outlook for the key hospitality markets in Saudi Arabia remain positive as diversification efforts, social reforms and government led investments in infrastructure, entertainment and the tourism sector materialise.”
Robin Williamson, head of Real Estate Middle East, Deloitte Middle East, said: “In 2018, the Public Investment Fund (PIF) of Saudi Arabia launched several GIGA tourism and hospitality projects, which will undoubtedly contribute to the growth and evolution of a unique tourism industry in the Kingdom.
“However, there are a number of challenges including competition from established neighbouring tourism destinations, implementation of regulatory and social reforms, hotel staffing challenges and private sector investment. These challenges need to be addressed to ensure sustainable growth in the tourism and entertainment sectors.”
The Deloitte report also explores a number of key hospitality global trends and disruptors that will impact the hospitality market in Saudi Arabia and the wider region including an increased focus on data protection and cyber security and the use of Artificial Intelligence (AI).From online chatbots to virtual assistants like Alexa and Siri, AI continues to be leveraged in new products and service delivery techniques.
This, along with the growing focus on cybersecurity, is expected to have a major impact on the hospitality market going forward.
In addition, the global cruise sector is currently one of the most dynamic sectors in the travel industry. The developing port capacity in the region presents an excellent destination and departure points for European ships.
The Cruise Lines International Association (“CLIA”) reports that their members will jointly launch 18 new ocean ships in 2019 alone, with additional ships due to launch in the coming years. The Middle East was the fourth fastest growing source region for the cruise sector in 2018 according to the CLIA, with a growth rate of 6.6 per cent.
From an investment perspective, over the past five years, the hotel industry globally witnessed major consolidation. While the Middle East contributed approximately a third of outbound cross-border hotel investment funding in 2018, within the region, hotel investment is primarily focused on the development of new hotels and funded by regional capital.
Williamson added: “The pace of transformation across Saudi Arabia, in response to the Vision 2030 to date has been significant. For the past two to three years, the GCC’s largest economy has been planning and designing new structures for various government and quasi government bodies, as well as creating new government backed real estate development vehicles.
“As the Kingdom approaches the next phases i.e. delivery and operation, careful consideration of many influencing and relevant factors will be essential to ensure their long term success.” – TradeArabia News Service