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Tue 27 Jul 2010 04:00 AM

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Holy hosts

Why Saudi Arabia needs to put Makkah and Madinah firmly on the map.

Holy hosts
Dr Costas Verginis, director in consulting at Deloitte Middle East: religious travel to grow.
Holy hosts

Why Saudi Arabia needs to put Makkah and Madinah firmly on the map.

Saudi Arabia's holy cities of Makkah and Madinah are unique in the hospitality real estate market, benefitting from unlimited visitor demand from the world's 1.8 billion Muslims. Saudi Arabia itself, which relies heavily on domestic tourism, has a population of 27 million.

For this reason, Jones Lang LaSalle (JLL) recently conducted an in-depth report into the two markets - entitled Holy Cities: Saudi's Unique Real Estate Markets - in an attempt to forecast their future potential and redress the imbalance that has arisen as a result of the focus to date on property and tourism in Riyadh and Jeddah. Although the latter cities are far larger, the religious significance of Makkah and Madinah as custodians of the Holy Mosques in Islam, far outweighs their size, assert the authors.

According to JLL senior vice president Chiheb Ben-Mahmoud, the Saudi authorities have ramped up efforts to develop the cities in order to better manage the demand for accommodation, which has in turn seen interest from hoteliers grow.

"The Saudi authorities are backing an unprecedented effort to improve the conditions of safety and comfort for Hajj and Umrah visitors, while increasing the capacity in the Holy Cities of Makkah and Madinah to allow more visitors. This has created opportunities for investors attracted by the corresponding risk-return proposition," says Ben-Mahmoud.

Currently, 7.8 million Muslims per year visit Makkah and Madinah for either Hajj or Umrah, according to JLL, which forecasts that this could almost double to 13.75 million by 2019. While the Saudi Committee for Tourism and Antiquities (SCTA) is encouraging pilgrims to stay for longer breaks through its ‘Umrah-plus' strategy, it is important to bear in mind that these forecasts are conservative, taking into account the current restrictions set upon visas for Hajj and Umrah by the authorities.

Deloitte's analysis of the hospitality market in Saudi Arabia also highlights the holy cities and the predicted growth of pilgrim visitors.

Dr Costas Verginis, a director in consulting at Deloitte Middle East, says: "Religious tourism is expected to grow with Umrah visitors being the fastest growing segment. There are many hotel developments in all the major cities, the most exciting market, however, is Makkah, where several large projects, such as the Jabal Omar Development, are underway".

Another exciting development in Makkah is the Abraj Al Beit project, expected to be thrown into the limelight this year with the launch of Fairmont's Makkah Clock Royal Tower, which will be followed by sister properties Raffles and Swissötel - bringing in 2600 rooms in total - as well as the Mövenpick brand.

According to JLL, the total hotel stock in Makkah, which currently stands at 50,000 rooms, could double over the next 10 years, while in Madinah, 3000 rooms are expected to be added to the existing stock of 20,000 rooms in the next three years. In total, Makkah and Madinah are currently home to nearly 59% of Saudi Arabia's entire hotel room inventory.

However, the issue is not the number of rooms necessarily, but the quality. JLL estimates roughly only 5% of existing rooms to be of international standard quality, hence the support for projects such as those by Fairmont Raffles Hotels International.

Further hotels are set to follow (see upcoming properties chart), but there is little clarity yet on what is most needed - luxury hotels, budget hotels and furnished hotels are all on the cards for the cities.

Ben-Mahmoud observes: "Summarily, in the holy cities of Makkah and Madinah, leading international operators are competing to deploy their most prestigious upscale brands on the future hospitality projects. The extent to which the brands are in line with the current and future demand profile remains an open and highly interesting question.
"On the other hand, the conventional budget hospitality concept does not provide a straightforward or relevant alternative. The optimal hospitality model in the Holy Cities is yet to be reached in a context where investors and the Saudi authorities are challenging, each in their own way, the conventional ideas and visions."

Widening the scope

While the development of hotel stock in the holy cities is positive, experts are keen to point out that the growth of religious tourism in Saudi Arabia should not be done at the detriment of other sectors. One of the biggest challenges in attracting visitors to Saudi Arabia, according to Ben-Mahmoud, is image.

"Saudi Arabia, as a destination, is somehow victim of its "Holiness". Hajj and Umrah themselves have always been associated with trade and cultural interchange. Therefore, nothing prevents the serious and sophisticated traveller from enjoying the Saudi culture and sites, the cultural diversity of the country outside obviously Makkah and Madinah, which are restricted only to Muslims.

"Makkah and Madinah are of paramount importance for Muslims. This does not mean that the Kingdom of Saudi Arabia is limited to Makkah and Madinah," says Ben-Mahmoud.

Indeed, an offshoot of religious tourism is heritage tourism, he adds.

"The sites are numerous: Madain Salah, a UNESCO heritage site, long overshadowed by Petra but also all the sites in relation with the birth of Islam, before the Islam heritage became associated with Damascus, Cairo, Kairouan, Granda etc. The SCTA is here again in the process of re-identifying these sites and putting them back in the public domain as well as promoting the concept of ‘heritage hotels'," reveals Ben-Mahmoud.

Existing operators have also noticed a shift in visitor trends, as Peter Finamore, managing director of Rosewood's Al Faisaliah Hotel and Al Khozama Hotel explains.

"We are fortunate as time moves on, to see the loosening up of the availability of visas. We are hoping that, with the STCA taking significant forward initiatives now, to see more of the traditional tourism  beginning to occur in KSA," says Finamore.

Verginis adds: "It is anticipated that visitors will increase as the economy becomes more diversified.

"The Saudi Commission for Tourism and Antiquities is working hard to further develop tourism in the Kingdom through initiatives such as new visa regulations."

It is the sum of these factors that will be necessary to ensure continued investment into Saudi Arabia's hotel industry. As Ben-Mahmoud concludes: "There is a combination of factors related to both Hajj and Umrah travel as well as to business and leisure travel [which impact investment]. All factors come down to a simple fact: The Kingdom of Saudi Arabia is up for business and is moving forward big time".

Hal-Luke Savas 9 years ago

Above article is rather informative and well prepared but it seems the infrastructure is forgotten when fancy superstructure (hotels et al) is the talk of the town. There are serious issues with the infrastructure lacking in both Makkah and Medina in terms of 'what matters is what is on top, below will follow' attitude. Somehow everybody has forgotten the problems with inadequate infrastructure in Dubai allowing it to run out of fuel!! Regardless, developments in Makkah and Madina are impressive. Hal-Luke Savas MBA FCIM MBIFM ICIOB affCIBSE London