Drees & Sommer: Noteworthy growth predicted for Riyadh three-star hospitality sector

Drees & Sommer

Research from Drees & Sommer’s specialised global hospitality team has identified Riyadh’s three-star market as the best opportunity for growth, as Saudi Arabia’s capital undergoes a period of rapid economic diversification.

Managing director, global hospitality division, Drees & Sommer, Filippo Sona stated: “The Saudi tourism market has witnessed promising growth in recent years, particularly in domestic tourism and of course religious tourism. 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 but to also prepare the capital for a more diversified tourism offering.”

Several high-profile sporting events have underscored Riyadh’s reputation as a sports and entertainment destination in recent years. The ABB FIA Formula E Championship’s inaugural event took place in the historic surrounds of Ad Diriyah in 2018 and will return later this year with a crowd of 100,000 people expected. The capital also hosted some of WWE’s biggest stars during the Crown Jewel event, held in November 2018.

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“The three-star market will only account for approximately 19 per cent of the total hotel market in 2019, and an estimated 17 per cent in 2020,” Sona further noted. “Therefore, developing this segment could have the potential to return the greatest success for developers and the capital’s long-term tourism growth aspirations by attracting budget-conscious guests and families.”

The research also revealed that Riyadh’s hotel market witnessed growth in revenue per available room (RevPAR) and occupancy of seven per cent and three per cent 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 per cent increase.

The luxury segment continues to dominate the bulk ofnventory coming online, whereby the room count for the five-star market in Riyadh accounted for 43 per cent of total rooms in 2018 with 7,243, and this figure is expected to increase by 11 per cent to 8,042 in 2019 and by 19 per cent in 2020 to 9,584. In the four-star market, the total key count is expected to top 7,522 this year and 8,265 in 2020, indicating a 10 per cent increase.

Looking to the future, the findings outline several ways Riyadh could attract a range of new visitors by diversifying its offering from corporate visitors and government. Examples include focusing on emerging markets like China and India, reducing the dependence on local markets and religious tourism, as well as developing the quality of its F&B offering by introducing superior food and service standards.

Drees & Sommer commenced operations in the Middle East in 2003 by providing innovative solutions to the region’s real estate and hospitality sectors. Globally, the company has developed an impressive track record since it was established nearly 50 years ago and has delivered an extensive portfolio of world-class developments around the world including Dubai, Abu Dhabi, Ras Al Khaimah, Riyadh, Jeddah as well the UK, Germany and Switzerland, amongst others.