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Sun 26 Dec 2010 12:00 AM

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A slice of Saudi Arabia

With a predicted increase in visitors over the next four years, and hotel chains clamouring for a piece of the pie, Saudi Arabia’s tourism industry is set to boom says Harriet Sinclair.

A slice of Saudi Arabia
Located adjacent to the Masjid al Haram, Makkah Clock Royal Tower, A Fairmont Hotel stands 76-storeys tall and features a 40-metre Royal Clock, visible from 17 kilometers (10 miles) away, which will announce daily prayers to the Muslim world. Raffles Makkah Palace is also located on the site.

The Kingdom of Saudi Arabia has long been a draw for religious
tourists visiting the holy cities of Makkah and Madinah; but with the number of
hotels in these cities on the rise, and a predicated increase in the number of
both business and leisure travellers, tourism in Saudi Arabia is set to boom.

During 2009 the number of business travellers to the Kingdom
stood at 3.96 million, while leisure travellers accounted for 13 million
visitors. However, these figures are to be dwarfed over the next four years,
according to global information publisher Euromonitor International — which
forecasts business arrivals for 2014 of 7.5 million and puts leisure arrivals
at a staggering 22.7 million visitors.

According to Jones Lang LaSalle Hotels senior vice president
Chiheb Ben-Mahmoud, the Saudi Arabian market is characterised by two factors —
the large size of the domestic tourist market, and the importance of Hajj and
Umrah.

“Domestic tourism plays an essential role in the Saudi
Arabian hospitality sector,” explains Ben-Mahmoud.

“As of 2009, there were 33.5 million domestic visitors’
trips taken within Saudi
Arabia. Of these trips, almost 32 million
were tourist overnight trips, generating 198.5 million room nights. With the
impressive efforts of the SCTA in promoting domestic tourism, these numbers are
bound to grow and will have an impact on hotel occupancy rates, albeit in
school holiday periods.”

“In 2009, there were 10.9 million international tourist
(overnight) trips to the Kingdom of Saudi Arabia; of these 47% were for Hajj and Umrah
purposes (5.1 million arrivals out of a total 8.3 million Hajj and Umrah
visitors, the difference being the 3.2 million of Hajj and Umrah pilgrims from Saudi Arabia).”

It is these two unique factors which make the Saudi Arabian
market one of the most complex settings, Ben–Mahmoud stresses, as both segments
are in transition and are driven by different forces — domestic tourism is
emerging and demand moving to higher quality standards, while Hajj and Umrah
figures are more governed by government imposed regulations, due to the strategy
of upgrading the infrastructure and addressing the safety and security needs.

The increasing number of visitors may go some way towards
explaining the attraction Saudi
Arabia holds for hoteliers. With business
arrivals potentially doubling over the next four years, and leisure arrivals
increasing by almost 10,000 visitors, there is ample opportunity for brands to
enter the KSA market over the coming years.

“There are opportunities in Saudi Arabia because the number of
international hotels is still somehow limited, so opportunities are there,”
explains Rosewood Corniche managing director Hans Peter Leitzke.

“One of the reasons for our growth in a sense is that a
pretty large number of our guests are actually coming from within the Kingdom;
we actually have a lot of traffic between Riyadh and Jeddah and vice versa, so
the feeder market or the traffic is within, and this helps to sustain a certain
level of occupancy,” he adds.

Internal travel is an important aspect of the Saudi Arabian
market, as many Saudi Nationals choose to take holidays in KSA, as well as
travelling to the holy cities for Hajj and Umrah, asserts Michel Noblet, chief
executive officer of HMH — which is opening a number of hotels in the country
in the next two years.

“The strength of Saudi Arabia is that it is the biggest
market in the Gulf, so they rely on the domestic market and the domestic market
is very powerful so all the cities in the Kingdom, let’s say they develop good
business. It’s like India
– the strength is the domestic market. They don’t depend on international
visitors,” he explains.

Jeff Strachan, vice president sales and marketing, Middle
East and Africa, Marriott International, adds: “The Saudi Arabia market will continue
to grow exponentially over the next few years. Let us not forget that the
population growth within the Kingdom is enormous and, therefore, you will start
to see the quick emergence of secondary cities and also suburban areas around
the major cities”.

These locations and their demand generators are perfectly
suited to Marriott’s Residence Inn brand, which is set to enter the Middle East
at Jizan on the Red Sea in 2012, Strachan
explains.

International Brands

Joining Marriott in
targeted expansion in Saudi
Arabia over the next three years are major
international players in the hotel industry, such as IHG, Hilton, Mövenpick,
and Starwood, as well as Middle Eastern companies Rotana and HMH — all of whom
are looking to capitalise on the predicated increase of visitors to the
Kingdom.

Jean-Paul Herzog, president, Hilton Worldwide, MEA explains
that part of the draw of Saudi Arabia is the diverse set of visitors, ranging
from business tourists to religious tourists, with varying requirements and
budgets.

The cross-section of visitors to the Kingdom has also opened
up Saudi Arabia
beyond simply religious travel over the past decade, throwing up other markets
of interest to investors and operators.

“In recent years, Saudi Arabia has been proactive in
highlighting its numerous attractions including its rich cultural heritage,
historic sites, antiquities and resorts spread across the country,” says
Herzog.

“Some regions that
have attracted considerable interest over the past year include: Jeddah, which
is multi-faceted in its offerings —Jeddah has Balad, the old town, with its
ancient buildings and traditional souks, as well as the Corniche; Madain Saleh,
one of the best known archaeological sites in Saudi Arabia; Abha, located in
Asir in the south; and Janadriyah Festival, a national heritage site located 45
kilometres outside Riyadh.”

Of course the most well known market in Saudi Arabia is
religious tourism, and many of the recently opened hotels — such as the highly
anticipated Fairmont Raffles Hotels International (FRHI) properties; Makkah
Clock Royal Tower — A Fairmont Hotel and Raffles Makkah Palace, as well as
Mövenpick Hajjar Tower Makkah — have concentrated on this.

The opening of these hotels, as well as the upcoming FRHI
property — Swissôtel Makkah, which is set to open in 2011 — has increased the
number of rooms in Makkah by 1000, and with other brands following suit in the
holy city, there is no doubt that this remains the key market in the Kingdom.

Mohammed Arkobi, vice president and managing director of
Makkah FRHI, says: “In Makkah I think there is room for everybody because,
after seven years, Makkah can accommodate 10 million people at the same time,
so there is a potential for everyone — it is growing and booming very, very fast
and I think that the good market for the hotel industry will be Saudi Arabia in
the next five to six years.”

This opinion is shared by Raffles Makkah
Palace general manager
Nasir Saudi, who adds: “Now we have more supply coming up in the area but the
demand is always high; and no matter what supply you put in Makkah, the demand
will always be high.”

Recession-Proof

However, it is not just the attraction of the holy cities
which has piqued the interest of hoteliers in the country — the relatively low
impact of the recession on KSA, compared with other countries in the region and
globally, has made it an attractive prospect for potential investors.

“For several years the development in Saudi Arabia
was not very active, there was not a very high level of development, of
hospitality. However, recently, with the boom of the oil we have witnessed and
the economy in Saudi Arabia making it the largest and wealthiest country, the
growth — whether in demographic or in government — is phenomenal, so based on
that the country needs hotels that are of international standard and you don’t
find that easily in this region,” explains Golden Tulip senior vice president
and managing director MENA, Amine Moukarzel.

“A couple of hotel companies see a great niche in that
market place and the Saudi Arabian market place is still in need  [of high-quality hotels] and this is
definitely due to the healthy economy, to the large country, different cities
and large network,” he adds.

As well as existing brands, several new players are planning
properties in the Kingdom, with Shaza hotels — a joint venture between
Kempinksi and Shaza — choosing Madinah as the location for its first hotel, set
to open imminently, and the first Saudi Arabian hotel brand currently being
developed by Abdul Latif Jameel Real Estate Investment Company (ALJREIC).

“The tourism industry
in Saudi Arabia
presents growth potential and is growing at a rapid pace with investments
flowing into the country,” says Mohannad Mohanna, chief executive officer,
ALJREIC.

“Several big projects are springing up throughout the
Kingdom. The tourism industry is receiving huge investments owing to the
surging demand, and the huge amount of revenue is generated by the tourism
projects rapidly cropping up. Many businessmen and investors are focusing on
this sector and are lining up to launch their projects worth billions of
Riyal.  Abdul Latif Jameel Real Estate is
proud to invest in the hotel development and management industry in the Kingdom
and is aiming to create the first Saudi-origin hotel brand, create new job
opportunities for Saudi nationals and contribute positively to the well being
of the community,” Mohanna adds.

Quality Product

The healthy economy and the addition of new hotels to the Saudi
Arabian market is also encouraging existing hotels to improve the quality of
their product, with Four Seasons Hotel Riyadh recently undergoing a renovation
to bring the property up to the standard which visitors to Saudi Arabia, and
internal travellers, now expect from hotels in the Kingdom.

Four Seasons Riyadh general manager Rami Sayess reveals:
“The renovation discussions started almost three years ago and what triggered
that are a few things. First of all, although the hotel is only seven years old,
things are moving very fast in terms of technology, in terms of new designs and
guest expectations — so we saw an opportunity that, especially with the
economic crisis hitting in 2008-2009, we thought it  was better to use that soft few years to try
and complete that renovation during that time and also what really helped us is
the support we have received from the ownership of the group who strongly
believe in the product and in its potential to grow further.”

This focus on quality is in line with the vision of the
Saudi Commission for Tourism and Antiquities (SCTA), as its vice president
investment Dr Salah Al Bukkayet, explains: “Right now our focus is domestic
tourism and religious tourism. And the reason we are focusing on domestic
tourism is because of the fact that we are exporting a lot of tourists with a
lot of money.

“The reason that Saudi Arabian tourists are travelling
abroad is because the tourism offering in the country is just not acceptable to
them both from a quality and a price point of view. So for us it’s not logical
to invite somebody to come when the tourism offering is not satisfactory to
your own. They have to travel abroad to get this kind of experience so our
focus right now over the next three to five years is product development,
product development and product development,” continues Al Bukkayet.

“We need to develop our tourism facilities from a quantity
and a quality point of view to the level that we think is satisfactory to our
own tourists, because international tourists are by definition very experienced
and they know what to expect when they come to another area.

“So we would like to focus right now on improving our
tourism offering as a country, and once we have reached that level of
conviction that we are now ready to attract international tourists, then we
will have no problems. We have an expat community of more than six million
living within the country and they travel within Saudi Arabia and we have no issues
with them,” asserts Al Bukkayet.

Tourist Arrivals

Increased flight routes to the Kingdom will assist in this
ultimate focus on foreign visitors. Emirates Airline is currently increasing
its presence in the Kingdom — raising its weekly number of flights to Riyadh and Jeddah to 12,
and operations between the UAE and KSA by 71%, also increasing the economic
ties between the two countries.

“The introduction of an additional 3770 seats per week on
the two routes will further enhance the passenger movement between the two
countries. Business and leisure travellers in Saudi Arabia are seeking
connectivity to key commercial and leisure centres in Europe, as well as to the
Americas and Australasia — and these new flights will help expedite their
journey. Religious based travel to Saudi Arabia also continues to grow exponentially
each year, with these additional flights set to add some much needed capacity
for inbound traffic,” says Ahmed Khoory, Emirates senior vice president
commercial operations, Gulf, Middle East and Iran.

Emirates remains committed to the Saudi market with a total
of 38 flights per week to four cites including; Riyadh, Jeddah, Dammam and Al Medina al
Munawarah.

Although there has been an increase in flights across the
country, and visitor numbers are predicted to rise, challenges still remain in
the Saudi Arabian market; visa regulations have long been notoriously stringent
— something the aspiring hotelier branching in to KSA must consider in terms of
acquiring visas for staff members — and regulations laid out by the government
will see a five year plan requiring hotels to reach Saudisation figures of 80%
by 2015.

However, the situation is not entirely bleak, with several
hoteliers reporting relaxation of visa regulations, and others reporting
successful Saudisation figures of 32% (the current requirement) and above.

“Visas are not
necessarily a deterrent for people to come,” argues Rosewood’s Leitzke.

“It’s just a process and it can be tedious and complicated
at times but I think that the process has improved, Saudi Arabia starts to open up a
little bit. You hear now that there are some group visas being made available,
tourism starts to increase and again we can look at the religious travel alone
and this is  also on the upward trend and
a lot of things are being done in Makkah itself — new hotels are being built,
faculties are modernised, upgraded and so forth,” he adds.

It seems that hoteliers are right to be looking at securing
new flags in the Kingdom — with ease of travel improving, visitor numbers
predicted to almost double over the next four years, and the internal markets
of Makkah and Madinah guaranteed to attract visitors regardless of the state of
the global economy; this market is one which will continue make a huge impact
on the Middle East’s tourism industry.

As HMH’s Noblet concludes; “Saudi Arabia is the biggest market
in the Gulf — simple as that.”

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