A study conducted by Drees & Sommer has identified Riyadh’s three-star market as the best opportunity for growth.
According to the global hospitality firm, the capital is undergoing a period of rapid economic diversification with the introduction of a myriad of attractions, theme parks, sporting events and concerts.
“The Saudi tourism market has witnessed promising growth in recent years, particularly in domestic tourism and of course religious tourism,” says Filippo Sona, managing director of Drees & Sommer’s Global Hospitality division.
“In Riyadh specifically, the government is undertaking a $23 billion beautification project which will incorporate green spaces, recreational areas and art installations to improve the quality of life for residents and prepare the capital for a more diversified tourism offering,” adds Sona.
“The 3-star market will only account for approximately 19% of the total hotel market in 2019, and an estimated 17% in 2020. Therefore, developing this segment could have the potential to bring the greatest success for developers and the capital’s long-term tourism growth aspirations by attracting budget-conscious guests and families.”
Drees & Sommer also revealed that Riyadh’s hotel market witnessed growth in revenue per available room (RevPAR) and occupancy of 7% and 3% respectively this year, with an anticipated 4,500 keys expected to be delivered across three-, four- and five-star accommodation by 2020. This takes the total to 21,573 in the capital, from a base of 17,073 in 2018, a 26% increase.
The luxury segment continues to dominate the bulk of inventory coming online, with the room count for the five-star market in Riyadh accounting for 43% of total rooms in 2018 with 7,243. This figure is expected to increase by 11% to 8,042 in 2019 and 19% in 2020 to 9,584. In the 4-star market, the total key count is expected to top 7,522 this year and 8,265 in 2020, a 10% increase.
Average daily rates (ADR) are also predicted to become more resilient, with 2019 anticipated to return a 1% increase year-on-year, although a larger hotel room inventory could put downward pressure on rates.