JEDDAH – Need for more investment in the hotel sector – especially in the two holy cities – was highlighted here Sunday on the second day of the Residential and Affordable Housing summit taking place on the sidelines of the Jeddah Urban Development and Real Estate Investment Event – Cityscape Jeddah. Speakers at the summit said that despite the construction boom in Makkah more needs to be done to make hotels affordable and enough to accommodate the growing number of pilgrims. Filippo Sona, Head of Hotels and Resorts/Hospitality MENA, Colliers International, said that the main drivers for religious tourism were mega projects like the Haramain Railway and the massive Jabal Omer Project. According to a report published by Colliers International, there is a limited supply of quality internationally branded economy hotels in the Kingdom. Surveys show that there are currently seven notable cities without any such hotels, representing a significant gap in the market. However, many internationally branded economy hotels are coming up, with 1.182 rooms to be delivered to the market across the Kingdom by 2015. Colliers International's latest investigations have found evidence that the market could potentially absorb an additional 34,882 economy hotel rooms over and above forthcoming supply over the next five years, spread across major and secondary cities. Attractive investment opportunities lie in wait as economy hotels operate with a very cost-efficient structure characterized by a less volatile and sustainable pricing strategy. Based on the current profitability ratios of existing economy hotels, new developments prove to be a lucrative investment, with potential IRR ranges between 18% and 21%. Hussein Al-Harithy, Managing Director of National Exhibitions Company, said that the summit was specially designed as the perfect platform for hotel developers, investors, government officials, hoteliers and financiers to come together and share ideas, source new business contacts and shape strategies for maximizing and supporting growth of the Saudi Arabian hospitality industry. Hotel development has emerged as one of the most attractive segments in real estate in Saudi Arabia. Driven by an average growth of 6% year-on-year on business and tourism and the government's investment of SR100 billion in infrastructure and transportation projects, the opportunities to gain from high returns on hotels and overall boom in religious tourism throughout the Western province has never been more lucrative than now.
