JEDDAH – The boom in Saudi Arabia will increase the number of branded hotel beds available by 58 percent in the next few years, research company STR Global estimates. "The tourism industry in Saudi is rapidly expanding and our development plans reflect the growing demand for high- quality hotels in that market," said Christophe Landais, Middle East managing director for Paris-based Accor SA. "The Kingdom constitutes a strategic base for us." Last year, the Kingdom hosted 10.6 million pilgrims and religious visitors out of 15.4 million foreign arrivals overall, according to Business Monitor International. BMI estimates arrivals will increase by an average 6 percent annually until 2016. Accor, Europe's largest hotel operator, will open a 1,315-room Pullman hotel in Makkah and another property in the south of the Kingdom, Landais said. The Paris-based company plans to increase its properties in Saudi Arabia to 17 by 2015 from 12 at present. Rising wealth in Islamic countries from the Gulf to Indonesia is boosting demand for a higher standard of accommodation as about 3 million pilgrims prepare to descend on Makkah for the annual Haj in October. That's contributing to a surge of hotel investment in Saudi Arabia by companies including InterContinental Hotels Group Plc (IHG), Hyatt Hotels Corp. (H) and Starwood Hotels & Resorts Worldwide Inc. Hilton Worldwide Inc., owned by Blackstone Group LP, plans to more than double the number of hotels it operates in the country to 14, including six in Makkah. It currently runs six in Saudi Arabia. UK-based InterContinental will increase its room numbers by about 50 percent to 7,300 in the next three to five years. Hyatt, whose only Saudi hotel opened in 2009, expects to have eight more in five years. Starwood, the Stamford, Connecticut-based owner of the luxury St. Regis and W brands, has plans to manage five more hotels, adding about 1,300 rooms. It currently has 10 hotels with about 3,000 rooms. About 53,000 branded hotel rooms are currently available across the kingdom, about the same as the city of Dubai, according to STR Global. Those mostly provide five-star rooms with a few in the four-star bracket. About 19,000 are in Mecca and another 13,000 in Medina. Most pilgrims stay in furnished apartments, mainly supplied by individuals and small businesses, said Chiheb Ben Mahmoud, head of hotel advisory for the Middle East and Africa at Jones Lang LaSalle. That's also the most common type of accommodation for professionals in cities like Riyadh and Jeddah and holiday travelers in the south of the Kingdom.The Saudi Ministry of Hajj says it expects a record number of pilgrims this year. In 2011, 2.5 million passed through Jeddah's airport on 10,650 flights. "There is some kind of a catch-up in terms of capacity building," Jarmo Kotilaine, the Jeddah-based chief economist at National Commercial Bank, said by phone on June 14. "There has been a long period when there was very little addition." Rising visitor numbers only tell part of the story. The government's drive to improve health and safety standards in Mecca and Medina during the Hajj is triggering demand for hotels by discouraging the centuries-old practice of accommodating pilgrims in people's homes, said Jones Lang's Ben Mahmoud. "Branded hotels, regional or global, currently form the backbone of inventory in Mecca," Ben Mahmoud said. "The trend will continue as stricter guidelines for health and safety are implemented and because a higher standard of comfort is being demanded by pilgrims." Muslim Wealth The market for a better class of accommodation is being fuelled by economic growth in Muslim-majority countries. Turkey's economy expanded 8.5 percent last year, the third-most among Group of 20 nations after China and Argentina. Indonesia, the world's most populous Muslim nation, grew by 6.5 percent, the most since the Asian financial crisis that ended in 1998. "While most of the high-quality hotel supply has been five-star and four-star, Accor is seeing the emergence of real demand for other products like the economy three-star segment," Landais said. "For the moment, that's only fulfilled by local and unbranded hotel supply that lacks high quality standards most of the time." International hoteliers are also seeing opportunities in smaller cities such as Jizan, Yanbu, Khobar, Jubail and Hofuf, he said. – SG
