Saudi capital's three-star hotel market has been identified as the best opportunity for growth in new report
Riyadh’s three-star hotel market has been identified as the best opportunity for growth as the Saudi capital undergoes a period of rapid economic diversification with the introduction of a myriad of attractions, theme parks, sporting events and concerts, according to new research.
Research from consultants Drees & Sommer said the Saudi government's planned $23 billion beautification project in Riyadh will prepare the city for a "more diversified tourism offering".
“The three-star market will only account for approximately 19 percent of the total hotel market in 2019, and an estimated 17 percent in 2020. 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,” said Filippo Sona, managing director of Drees & Sommer’s global hospitality division.
“The Saudi tourism market has witnessed promising growth in recent years, particularly in domestic tourism and of course religious tourism.”
Several high-profile sporting events have also underscored Riyadh’s reputation as a sports and entertainment destination in recent years, he said.
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.
The research also revealed Riyadh’s hotel market witnessed growth in revenue per available room (RevPAR) and occupancy of 7 percent and 3 percent 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 percent increase.
The luxury segment continues to dominate the bulk of inventory coming online, as the room count for the five-star market in Riyadh accounted for 43 percent of total rooms in 2018 with 7,243 and this figure is expected to increase by 11 percent to 8,042 in 2019 and by 19 percent 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, a 10 percent increase.
Average daily rates (ADR) are also predicted to become more resilient, with 2019 anticipated to return a 1 percent increase year-on-year, although a larger hotel room inventory could put downward pressure on rates.