Finding the key to the Kingdom

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InterContinental Al Khobar.

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InterContinental Al Khobar.

Saudi Arabia is not known for embracing change, but the relaxation of travel restrictions and ongoing hotel and infrastructure development are slowly forcing the country to open up.

Saudi Arabia has a global reputation for being an affluent country and therefore ripe for hotel investment, but it has also been regarded as a society closed off to a certain extent from the non-Muslim world.

Hilton Hotels president - Middle East and Africa Jean-Paul Herzog says that despite this reputation "Saudi Arabia is doing very well and is enjoying the same growth as the rest of the GCC" in terms of the hotel industry.

"The issue of attracting guests has resolved itself, but our capacity is obviously limited. We can't force people to come to Saudi Arabia," he adds.

InterContinental Hotels Group vice president - development Middle East and Africa Phil Kasselis agrees that attracting tourism to Saudi Arabia is going to remain somewhat challenging unless visa restrictions are lifted and travel can be facilitated to the country.

"Even for business travel it's still sometimes challenging to travel to Saudi Arabia at very short notice and, whilst it may be a lot easier for pan-Arab travellers, for a lot of western companies to get to Saudi Arabia is not as easy as other destinations," he adds.

The key to success for Kasselis is forging close relationships with government, high net-worth individuals and the royal family within the country - as is the case for most parts of the Middle East.

"InterContinental Hotels Group has been in Saudi Arabia for many years and has built those close relationships. It's not what's in the management contract that counts, it's the relationship and the ability to provide the service required, and the protocol required," he says.

"I don't see any [major] challenges other than the fact it's very difficult for foreigners to invest in Saudi Arabia, or even for non-Saudis to invest. Most of our owners in Saudi Arabia are Saudis, high net worth individuals, large family businesses that have been around for many years and specialise in hotel. That's just how business is done over there."

The market is challenging, but both InterContinental Hotels Group (IHG) and Hilton Hotels have been present in the Saudi Arabian market for some time and share the same positive view of the hotel industry's future growth and development.

IHG has 20 properties in Saudi Arabia, with its InterContinental, Crowne Plaza and Holiday Inn brands "already established in the community" explains Kasselis.

"Tourism in Saudi Arabia is strengthening, there's no doubt about that. It's primarily driven by religious tourism [during the Haj pilgrimage], but also relaxation of visa restrictions, corporate activity and the infrastructure development that we see continuing," he adds.

The major future developments will be the economic cities, including the multi-million dollar King Abdullah Economic City on the Red Sea Coast just north of Jeddah, and five others in Tabuk, Ribigh, Hail, Madinah and Jizan due for completion by 2020.

"While they're still a long way off [completion] we see that they are going to generate not only supply-induced demand - where the activity of building generates demand from accommodation - but also commercial activity as a result of the building, as seen in Dubai and Abu Dhabi," says Kasselis.

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