Colliers says pressure will remain on room rates this year with average daily rates forecast to slump 12%
About 40 percent of new hotel supply expected in Riyadh during 2017 will be delayed, but pressure will remain on room rates, according to a new report by real estate consultants Colliers.
Despite the softening impact of new supply on the market this year, Colliers forecast that full-year 2017 revenue per available room (RevPAR) for hoteliers in the Saudi capital will fall by 4 percent.
The report said the decrease would be driven by a 12 percent drop in average daily rates as well as the low oil price environment and economic slowdown in the Gulf kingdom.
Occupancy at Riyadh's hotels is expected to rise by 9 percent to 59 percent.
In 2016, Riyadh saw a 23 percent increase in hotel supply, rising to 8,363 rooms and that figure is forecast to grow to more than 10,000 by the end of this year, Colliers said.
It added that 90 percent of hotel supply fall into the 4-star and 5-star categories, offering the opportunity to increase mid-market presence in the city.
Colliers said the mid-term prospects for Riyadh's hospitality market were positive, with a Six Flags theme park and two major malls - Mall of Saudi and The Avenues - in the pipeline.
"These developments will undoubtedly increase the domestic leisure tourism to Riyadh, which in turn will increase the length of stay and weekend occupancy in the long term," the report noted.