Saudi Arabia: The kingdom of tomorrow?

There are 55 major tourism developments planned or under construction, including 39 hotels and resorts, four museums and libraries, one mall, seven sports stadia / leisure complexes, two theme parks and two convention centres. At the Arabian Hotel Investment Conference (AHIC) 2015 we witnessed a panel of industry experts discussing the major developments shaping the sector and who is leading the way?

Moderator: Amine Moukarzel, president, Louvre Hotels and Golden Tulip MENA

Panelists:
Eng. Tariq Al Essa, executive director, Saudi Exhibition and Convention Bureau

Olivier Granet, senior vice president of development, Middle East, Accor

Assem Kaissi, chief operating officer, Omar Kassem Alesayi Group

Denis Sorin, president of hotel operations, Dur Hospitality

Moukarzel commenced the discussion by outlining Saudi Arabia’s GDP dominance throughout the region, being responsible for over 50 per cent GDP in GCC, and over 50 airports to aid travel and tourism, making the value of the market estimated at $45.3 billion in 2014, of which $18.7 billion was generated from domestic tourism and almost $27 billion from religious and other forms of tourism.

The panel offered a brief overview of tourism with Jeddah the most visited, Riyadh popular for leisure travel, and Mecca and Medina for Islamic religious beliefs.

More easily understood licensing framework and relaxing of visa restrictions

Al Essa said the Saudi Exhibition and Convention Bureau had been created to drive potential demand for hotels, meetings incentives, conventions and exhibitions (MICE), and the government had plans to introduce a simpler and more easily understood regulatory framework of licensing, and a relaxing of certain visa restrictions is close to being approved. The Saudi Commission for Tourism and Antiquities has already approved provisions to issue tourism visas in a bid to enhance the kingdom’s tourism industry growth prospects.

The accommodation opportunity

“We will have world class venues – at present there’s just one convention centre in Riyadh and the government is keen to work more with the private sector than in the past” said Al Essa. High profile projects include the $450 million Hilton Riyadh Hotel and Resort and $500 million Millennium Jeddah. “There’s only one five star hotel in Al Qasim at the moment for example” said Al Essa and the panel called for more focus on information and statistic availability for investors to understand which should ultimately raise industry standards.

Rooms v visitor ratio

“Within the Kingdom there are three rooms per 1,000 visitors, whereas Europe and USA have 10 and 15 rooms available respectively – there’s plenty of growth possible,” said Mourkarzel. There are currently 62,330 rooms in the Saudi Arabia accommodation market, with 35,844 under contract, according to data from STR Global.

Key traveller and accommodation statistics

New data recently released by YouGov has provided some key insights into the Saudi traveller: Around 33 per cent stay in budget hotels, 33 per cent in serviced apartments and 25 per cent in luxury hotels. Nearly 40 per cent of KSA residents book their flights through OTAs compared to the overall MENA average of 28 per cent, and accommodation bookings via OTAs remain the most popular booking method with 22 per cent using this channel, followed by travel booking websites at 17 per cent and direct offline bookings at 17 per cent also. Once at their destination, leisure travellers from Saudi Arabia are also more likely than other MENA-based vacationers to travel with and rely on smartphones to upload photos and video, play games, check emails and access social media, the YouGov report found.

Challenges within the sector

The panel moved onto challenges the sector faced with the cost of land and regulation being highlighted together with perhaps an over-reliance on religious tourism currently responsible for over 50 per cent of the inbound tourist market. A more considered approach to the needs of the domestic and MICE traveller with a focus on value and good quality accommodation options was also highlighted.

Dur Hospitality and Saudi-isation

The conversation then moved to Sorin as president of Dur Hospitality who said there are both challenges and opportunities with the SCTA’s new classification and its adoption within the oldest KSA hotel chain: “We want KSA to succeed and we’re happy with the changes. We have both old and young who are well educated and want to achieve.”

Work visas need to be processed quicker. Our competitors recruit our staff, which tells us we are training well and our plan is to recruit 100 per cent Saudi general managers for our properties. Around 31 per cent of our hotel workforce are Saudis, which is above the 25 per cent target set by the government’s focus on Saudi-isation.”

Accor’s accommodation pipeline and the Omar Kassem Alesayi Group roll out

Granet then outlined Accor’s robust pipeline for the region, “we’re opening up one hotel per month in the MENA region with three Saudi Arabia openings scheduled over the next 12 months, and 26 in the pipeline. We have a lot of trust, confidence and experience with the authorities, regulations are evolving with the commitment of hotel operators and local partners.” Panel conversation then moved onto the recent decline in oil production and it’s impact on pricing, and the cost of a barrel now stabilising at around $60 USD. “It’s an opportunity to boost meetings business and drive innovation within the region” said Al Essa. “We are the knowledge economy,” said Moukarzel, continuing “Saudi Arabia leads the world with petro chemical development and water treatment industries.”

This focus on leadership prompted Kaissi to outline the Omar Kassem Alesayi Group  agreement with Accor, “we came up with a business plan four years ago and worked together to develop branded hotel facilities and aligned our objectives with the SCTA. There’s now 10 Ibis hotels, 10 Adagio aparthotels in seven locations with 3,800 keys and there’s still unsatisfied demandfor branded, quality and affordable offerings.”