Tourism growth Improvements to infrastructure Diversifying economy - Savills
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EMEA Commercial – 2019
S P OT L I G H T
Saudi Arabia
Savills Research
Hotel Market
Tourism growth Improvements to infrastructure Diversifying economy
Saudi Arabia Hotel Market
International visitor arrivals in Saudi Arabia topped
16.1m in 2017, alongside a 10.5% increase in expenditure to
$14.8bn
Overview
Recent tourism growth in
Saudi Arabia has been
driven by three key demand
pools - leisure, pilgrim and
corporate visitors.
Each demand pool has
played a pivotal role in the
growth of the country’s
tourism industry. This has
been complemented by
various government-led
initiatives, broadening KSA’s
tourism offer.
The introduction of luxury
resorts, entertainment
centres as well as key
international events have
added to the tourism offer
of the country.
As a result, KSA has
considerably increased its
hotel inventory, with rooms
Demand drives hotel growth
in construction set to
expand current supply
levels extensively.
Saudi Arabia’s large
Extensive visitor growth outlook for the three key tourist demand
population bodes well for
additional hotel supply pools is accelerating hotel requirements across Saudi Arabia
growth, with domestic Saudi Arabia has dramatically attracting a number of levels of interest amongst some
tourism levels expected to increased its hotel offering in international brands of the world’s largest hotel
rise significantly. recent years following growing A rapidly emerging tourism sector groups. For example, Marriott
Domestic travel will interest from international hotel has boosted hotel requirements International opened the
become an increasingly groups. Hotel supply in terms across Saudi Arabia, driven by country’s first two Aloft hotels in
popular option given the of rooms grew by 13% over 2017 the three key demand pools of Riyadh and Dhahran in 2016. 2017
range of luxury resort with rooms in construction set to corporate, leisure and religious saw Rocco Forte Hotels open the
developments underway, increase current stock levels by visitors. Travel and tourism Assila hotel in Jeddah and in 2018
coupled with various 51.4%, with over 48,000 rooms, alone accounted for 9.4% of the both Hilton and Swiss-Belhotel
entertainment projects according to STR. country’s total GDP over 2017. International each opened three
planned across the nation. This accounted for a 37.9% Total international overnight hotels over the course of the
Numerous high-profile share of all rooms in construction visitor arrivals in Saudi Arabia year. Groups including Accor and
transport infrastructure across the Middle East, according topped 16.1m in 2017, alongside InterContinental are also looking
projects currently in to STR as of October 2018. While a 10.5% year-on-year increase to expand into new locations
development will ease travel cities such as Riyadh, Jeddah, in expenditure to $14.8bn. This across the country.
both domestically and Makkah (Mecca) and Madinah encouraging growth is forecast
internationally, improving (Medina) continue to lead the to continue, with international Luxury resorts in construction
way, considerably increasing their arrivals due to increase on average will widen choice for both
Saudi Arabia’s overall
hospitality offering, a number of by 4% per annum to 2025 to reach domestic and international
connectivity.
smaller destinations are beginning 22.1m according to the World visitors
to rise as attractive opportunity Travel and Tourism Council The Kingdom of Saudi Arabia
markets, such as Dammam and (WTTC), which would exceed (KSA) has an array of large-scale
Jazan. Dubai’s current level of visitor leisure-focused developments in
arrivals by almost 40%. the pipeline, to meet the needs of a
An expansive tourism sector is This has sparked significant growing number of visitor arrivals.
Rooms in construction are set to increase current stock
levels by 51.4%, delivering over 48,000 new rooms
savills.com/research 2
Saudi Arabia Hotel Market
Saudi Arabia accounts for
59.5% of the total
population of all GCC
59.5%
nations.
This includes the Public Investment also shows no sign of abating, with Hajj and Umrah visitor are set to
60m expected
Fund (PIF) backed Red Sea GDP forecast to grow by an average draw 30 million visitors by 2030
passenger numbers
each year on the
Development project, set to include of 3.6% per annum over the next Perhaps the cornerstone of KSA’s
Haramain High- over 2,500 rooms across 40-50 five years. This is particularly inbound tourism are the annual
Speed Rail line. hotels – enticing a number of global strong when compared to other pilgrimages of Hajj and Umrah,
brands, including Intercontinental GCC nations, outperforming the which drew 2.4m and 6.5m visitors
Hotels Group. This giga-project likes of UAE and Kuwait. respectively over the two most
is due to complete in 2022 and The government has existing recent events – forecast to increase
forecast to attract an estimated one plans, under the Vision 2030 to 30m visitors collectively by
million visitors annually. implementation, to capitalise on 2030. A 30-day Visa extension
Amaala, a new ultra-luxury this domestic demand having set available for Umrah visitors has
tourism megaproject, will consist of aside $64bn to invest in culture, undoubtedly contributed to the
developing 2,500 luxury hotel keys leisure and entertainment projects increase in average length of stay
alongside 700 villas and marinas over the next decade. One major from overseas visitors (from 9.7
$500bn NEOM
by 2028. While attracting millions example of this is the multi- days in 2016 to 11.3 in 2017). This,
project, opening in
2025, will
of overseas visitors, projects like purpose entertainment resort of alongside recent restrictions on the
significantly the above will undoubtedly appeal Qiddiya, due to welcome the world’s use of non-hotel accommodation in
increase KSA’s to domestic visitors, who have largest Six Flags theme park and Makkah during Hajj (such as home-
corporate demand. historically spent a great deal of estimated to attract 17m visitors stays) has helped to boost hotel
money travelling overseas. per annum by 2030. occupancy levels in the area during
In line with this, Riyadh this period.
Prospects for domestic demand now plays host to various key Upgrades to cultural sites across
are also positive international events. This includes the country will improve access
KSA has a significantly large the likes of the International Half and capacity for pilgrim visitors.
population, accounting for 59.5% Marathon, Time Entertainment’s The Grand Mosque of Makkah is
of the total population of all Gulf Comic-Con as well as the first currently undergoing restoration,
Cooperation Council (GCC) Formula E event held in the Middle increasing its capacity to 2.5m with
countries. In GDP terms, Saudi East, in December 2018. This was the city constructing the first new
22.1m international
Arabia is the largest in the Middle also the first event to introduce the Islamic Faith Museum of Makkah
overnight visitor
arrivals expected by
East and 1.7x that of the next largest Sharek international events visa, just 7km away. This is alongside
2025. from the GCC countries (UAE). allowing overseas visitors to easily the Jabal Omar Project, which
Economic growth in Saudi Arabia obtain a 30-day electronic visa. is expected to see over 12,000
International Arrivals Overnight arrivals in Saudi Arabia are expected to
reach 22.1m by 2025.
Overseas visitor arrivals
25,000
13% growth in hotel 2017-2025
room supply over 4% annual average
2017. growth rate
Overnight visitors (000’s)
20,000
15,000
10,000
91.8m passenger 5,000
numbers across all
airports in KSA last
year. -
Source Savills Research, WTTC
3Saudi Arabia Hotel Market
GDP Outlook vs Employment Growth Saudi Arabia is one of the largest and EXTENDED STAY
fastest growing economies of the GCC. OPERATORS EYE GROWTH
Key Size of bubble = size of GDP (2018)
OPPORTUNITIES
3.5% The extended stay market has recently
become a well-established sub sector
Total Employment Growth (2018-23)
3.0% in hospitality globally, with a number of
international operators expanding into
Bahrain Saudi Arabia new emerging geographies.
2.5%
The expanding corporate sector
across Saudi Arabia continues to
2.0%
provide widespread investment
Kuwait opportunities for extended stay
1.5%
operators. However, many brands
Oman could just as easily capitalise on
1.0% UAE Qatar the increasing leisure and pilgrim
visitor markets, which is generally
0.5% characterised by families travelling
together – well suited to more cost-
0.0% effective extended-stay options. Saudi
3.0% 3.2% 3.4% 3.6% 3.8% 4.0% 4.2% Arabia’s largely young, and increasingly
GDP Growth (2018-23)
more cosmopolitan, population unlocks
Source Savills Research, Oxford Economics further opportunities for lifestyle-
focused operators.
hotel rooms introduced across international hub for business being supported by widespread A number of global extended-stay
15 international hotels (with the visitors, arising as a focal point investment into travel providers have taken advantage of the
likes of Marriott, Hilton and Hyatt for trade and travel within the infrastructure. opportunity to open apartments within
Regency). Middle East. For example, 52.8% Airport connectivity has Saudi Arabia’s relatively undersupplied
of tourist spend in Riyadh is significantly improved across market, with the likes of Frasers
Investment into alternative accounted for by corporate visitors KSA, which has led to a boost Hospitality opening their first site in
sectors will drive growth in alone, according to the WTTC’s in passenger numbers. Last the country with a 95-key aparthotel in
corporate demand 2018 report. The impacts of this year, airport passenger numbers Riyadh in February 2018. Likewise, both
While there has been a historic were felt in September 2018 with increased by 7.7% to 91.8m across Citadines and Staybridge Suites have
reliance on the oil sector in KSA, the city experiencing a 33.4% rise all airports in KSA, according introduced sites to Jeddah over the
the Vision 2030 initiative focuses in hotel demand (rooms booked) to the Saudi Arabian General past two years.
on investment opportunities in following four major events Authority of Civil Aviation.
alternative industries. Not only held at the Riyadh International Saudi Arabian Airlines now
will this broaden the country’s Convention & Exhibition Center. serves over 70 international
corporate profile, it will also widen This triggered a 10.7% year-on- locations, while smaller airlines in
and drive corporate traveller year increase in RevPAR figures. KSA continue to expand. Flynas,
demand which will become key for In general across KSA, recent for example, are extending current
Saudi Arabia’s hotel market. stock growth has caused some stock significantly while passenger
This broadening in corporate headwinds in terms of RevPAR numbers in 2017 increased to 6.4
demand will be supported by
projects such as the $500bn
performance, however we expect
these impacts to wane over the
million.
The recent opening of the 3.6%
NEOM project, also financed by longer term when taking into Haramain High-Speed Rail, Average annual GDP
PIF and due to open in 2025. It account the strong economic linking major hubs of Makkah
is a cross-border sustainable outlook (when compared to other and Madinah via Jeddah, is
growth rate in Saudi Arabia
economic city focusing on a GCC nations), coupled with high rumoured to transport 60m over the next 5 years.
number of alternative industries levels of growth in both arrivals passengers per annum when in
including energy, biotech, tourism and spend across the three key full use. The connection will open
and media. While accommodating demand pools. opportunities for domestic leisure
a number of permanent residents, and pilgrim visitors alike, allowing
the project is set to attract both Various expansion projects to travel between the two key
domestic and overseas corporate transportation hubs continue to historic cities within 3 hours.
travellers on a regular basis. increase connectivity
Riyadh has become an The growth in hospitality is
A diversification of Saudi Arabia’s economy has provided a
boost for employment and its GDP outlook
savills.com/research 4Savills Middle East
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Hotels
Nick Newell George Nicholas David O’Hara Richard Paul Vikram Malhotra
Hotel Valuations Global Head of Hotels Head of Kingdom of Saudi Head of Professional Head of Hospitality Advisory,
+44 (0)20 7409 5953 +44 (0)20 7904 9904 Arabia Services & Consultancy Middle East
nnewell@savills.com gnicholas@savills.com +966 11 484 7161 Middle East +971 4 365 7700
david.ohara@savills.sa +971 4 365 7700 vikram.malhotra@savills.me
richard.paul@savills.me
Research
Joshua Arnold Marie HIckey Swapnil Pillai
Commercial Commercial Commercial
+44 (0)20 7299 3043 +44 (0)20 3208288 +971 4 365 7700
josh.arnold@savills.com mlhickey@savills.com swapnil.pillai@savills.me
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