By Sam Bridge
Deloitte research reveals growing pressure on Saudi hotel rates as supply continues to increase
Saudi Arabia's hospitality market experienced a challenging year so far in 2019 compared to previous years, but the long-term outlook for the market remains positive, according to new research.
Deloitte Financial Advisory's report said performance in Makkah improved in the first half of 2019 with occupancy up 10 percent, reaching 68 percent but an increase in supply continued to put pressure on average daily rates (ADR) which fell by 8 percent over the same period.
The combined effect resulted in an increase in revenue per available room (RevPAR) by 1 percent, the report added.
Deloitte said the hotel market in the Dammam and Al Khobar region saw a 10 percent increase in occupancy in the first half of 2019 compared to the same period last year.
However, ADR continued to soften, with a 17 percent decline, resulting in an overall decline in RevPAR of 8 percent.
Average occupancy levels in Riyadh saw a 5 percent increase compared to the same period last year, while increasing supply and competition led to a reduction in ADR by 10 percent, with RevPAR down by 6 percent.
While occupancy levels in Jeddah remained stable, increasing supply and competition continued to drive reductions in ADR and consequently RevPAR, which saw a decline of 11 percent in the first half of 2019, compared to the same period last year.
Dunia Joulani, head of travel, hospitality and leisure, Deloitte Middle East said: “Overall the long-term outlook for the key hospitality markets in Saudi Arabia remain positive as diversification efforts, social reforms and government led investments in infrastructure, entertainment and the tourism sector materialise.”
Robin Williamson, head of real estate Middle East, Deloitte Middle East, said: “In 2018, the Public Investment Fund of Saudi Arabia launched several giga tourism and hospitality projects, which will undoubtedly contribute to the growth and evolution of a unique tourism industry in the kingdom. However, there are a number of challenges including competition from established neighbouring tourism destinations, implementation of regulatory and social reforms, hotel staffing challenges and private sector investment. These challenges need to be addressed to ensure sustainable growth in the tourism and entertainment sectors."