Executives Talk About Potential Of Saudi Arabia
-- Hotels, 7/1/2008
Interviews with industry executives about the growing potential for hotel development in Saudi Arabia:
Guido De Wilde, Vice President, Regional Director Middle East, Starwood Hotels and Resorts
Can you tell me about Starwood's development plans in Saudi Arabia? Please offer as many specifics as possible.
We currently have 10 hotels in the country and have been successful in opening and operating our hotels in Riyadh, Jeddah, Makkah, Medina, Taif, Al Khobar and Dammam.
We are building on this success and are currently negotiating further projects in the key cities of the Kingdom. Till today we have a wide representation of both our Sheraton and Le Méridien brands in the Kingdom and we are currently looking at introducing our other brands as well. We are also interested in “secondary” locations in the country that have a shortage of hotels.
Are you aware of the Kingdom's new push for tourism and what are your thoughts about it?
The government represented by the Supreme Commission for Tourism is interested to develop the tourism sector in the Kingdom. They have worked for a long time on their research and have established strategic plans for the different regions in the Kingdom. The main focus is on further developing travel to the two Holy cities Makkah and Medina and improving the infrastructure in both cities as well as creating more domestic tourism.
The launch of two new National Airlines besides the well established “Saudi Airlines” will have a major impact on domestic tourism and should result in an increase in travel within the Kingdom. In addition, the railway project linking the Eastern Province with Riyadh and the Western Province as well as linking Jeddah with the two Holy Cities Medina and Makkah was recently announced which will definitely create more opportunities for further tourism investment projects in the major cities of the Kingdom.
How much potential does Saudi Arabia hold for Starwood? Is it more business or potentially regional leisure travel?
Apart from the religious travel destinations Makkah and Medina, all other cities enjoy predominantly business travel. We are happy with our performance in Saudi Arabia however, we believe that there is room for substantial growth and are focusing heavily on growing our brands in the Kingdom. We believe we can have 8 of our Starwood brands represented in the country and even within certain cities we are looking into multiple brand presence just like our presence in Jeddah where we have the Sheraton, Le Méridien and the Westin brands.
What is the key to developing in Saudi Arabia and how have you found good local partners? Can you tell me who your local partners are?
We have been operating hotels in Saudi Arabia since the early 80’s with local partners. We are enjoying great relationships in the Kingdom and are looking forward to expanding on these relationships and building new partnerships.
Is there more opportunity in the luxe category versus limited service?
Both segments represent good potential. I believe that hotel development in the Kingdom is at a starting point. With our 9 brands operating in the 5 and 4 star segments we are well positioned to grow our presence in the Kingdom. We see great potential for our limited service brands to grow in the Kingdom which includes our Four Points by Sheraton, Aloft and Element brands. As for the luxury segment, there is definitely room for our Westin, The Luxury Collection and St Regis brands besides the inevitable growth of our existing brands in the Kingdom which are Sheraton and Le Méridien.
Where in Saudi are the best opportunities for development and performance?
Makkah, Riyadh, Medina, Jeddah, the Eastern province and secondary locations where there is a shortage of hotels (Yanbu, Tabuk, Al Hofuf etc.)
Tom Rowntree, vice president commercial for Middle East and Africa, IHG
Can you tell me about IHG's development plans in Saudi Arabia? Please offer as many specifics as possible.
IHG has a strong presence within KSA across all brands, operating a total of 21 properties and 4,536 rooms in the region with a further three properties and 1170 rooms in the development pipeline.
IHG recently signed a development deal to open 12 Express by Holiday Inn properties in KSA within the next five years
Are you aware of the Kingdom's new push for tourism and what are your thoughts about it?
The Kingdom of Saudi Arabia attracts a wealth of tourists each year with a large amount of these tourists travelling to the Kingdom for religious tourism and pilgrimages. IHG is committed to supporting the governments push to increase wider based tourism and is certain that KSA has great potential to become a strong inbound tourism market in the future, particularly for Middle Eastern travelers and their families.
Saudi Arabia currently has a strong business tourism market and InterContinental Hotels Group is leading the way in providing quality accommodation for these travelers in the form of Crowne Plaza, Holiday Inn and Express by Holiday Inn– all designed to meet the varying needs of the business traveler.
We are committed to leading the surge of new accommodations being provided in the Kingdom and will continue to invest heavily in this prime location moving forward into the future.
How much potential does Saudi Arabia hold for IHG? Is it more business or potentially regional leisure travel?
The KSA travel industry is vital and is the most significant in the Middle East. According to the Vision 2020 document, KSA is expected to attract 43 million tourists by 2020 – the largest tourism forecast in the region.
The hotel market within KSA is extremely strong and continues to grow year on year. IHG is investing heavily in the region and has an aggressive development plan in place for the coming years.
As the travel market in KSA matures and diversifies, IHG is committed to introducing a range of properties to suit the needs of today’s varied travelers. Being one of the largest and richest countries in the Middle East, Saudi is one of the region’s main business hubs. In addition, KSA welcomes millions of travelers for the Hajj and Omra pilgrimage each year.
What is the key to developing in Saudi Arabia and how have you found good local partners? Can you tell me who your local partners are?
Like most parts of the Middle East, good owner relationships are key to developing in Saudi Arabia. IHG has been operating in KSA for over 30 years. While a number of our hotels are managed for and on behalf of Government or quasi-government entities IHG has established relationships with groups such as Al Amoudi Hotels, Al Rajhi, Al-Hokair Group, and Abdullah Al Mousa Co. to name a few.
Is there more opportunity in the luxe category versus limited service?
As visitor numbers to the Middle East increase so too will the diversity of the traveler. These travelers will visit from around the globe as well as intra-regionally for business and leisure travel spanning different age groups, ethnicities and income brackets.
The luxury market will remain a top priority for hotel operators in the region; however, other travel segments are opening up as the Middle Eastern travel and tourism market matures and diversifies and guests become more astute. Looking to the future, IHG believes there is room to grow and for more brands to be introduced as the hotel industry still has relatively few market segments and many are solely based on price (5-star vs. 4-star vs. 3-star).
IHG is committed to introducing a wider range of brands to suit the needs of today’s varied travelers and, in this highly competitive market, is also focused on differentiating these brands to stand out from the competition. IHG already has a strong presence across its five tiers of hotel brands in many of the destinations regarded as up and coming in the Middle East Africa (MEA) region and continues to explore other development opportunities as part of its expansion plans.
With the introduction of Express by Holiday Inn the hotel market has been significantly expanded catering to those budget conscious travelers seeking value for money accommodation and services.
Where in Saudi are the best opportunities for development and performance?
A number of markets across KSA have been identified as key areas for IHG properties. Riyadh and Jeddah are already established destinations for business travel and as such will be important target markets over the coming years. Damam and Al Khobar are also becoming increasingly important destinations, as well as other commercial hubs and industrial developments.
Toufic Tamim, vice president sales & marketing, Mövenpick Hotels & Resorts
Can you tell me about Movenpick's development plans in Saudi Arabia? Please offer as many specifics as possible.
Saudi Arabia is an important destination for us not only because of the relaxing of visa laws for pilgrimage and the massive investment in infrastructure but, more importantly, because of the vision of the government to develop the business infrastructure and both intra-regional and religious tourism to Jeddah, Makkah and Madinah.
We expect to see a growth in year round religious tourism to these destinations and an increase in the corporate and government segment in Riyadh and Al Khobar and as a result we will be significantly expanding our portfolio in Saudi Arabia with two new properties in Makkah and Yanbu opening this year and a third hotel in Riyadh opening in 2009. We are one of the largest hotel chains in the Kingdom with more than 3650 rooms and currently operate properties in Jeddah, Madinah and Qassim with a new 5-star hotel in Al Khobar just opened.
Are you aware of the Kingdom's new push for tourism and what are your thoughts about it?
While the country has very rich and vast oil reserves, it has also displayed a tremendous potential for tourism. There are huge investments being made in religious tourism projects with a number of planned mixed use and fully integrated developments incorporating golf, shopping, restaurants, family style facilities and hotels also in the pipeline.
The Kingdom’s drive to promote domestic tourism, persuading Saudis to holiday at home, is achieving quiet success.
How much potential does Saudi Arabia hold for Movenpick? Is it more business or potentially regional leisure travel?
Major projects in Makkah and our focussed expansion strategy are positive indicators of the growth and prosperity of this destination. Our presence here will not only contribute to the anticipated rapid growth of the hospitality industry in the Kingdom but will also help market the destination to positively impact the entire Haj and Umrah market segment for both Makkah and Madinah
At the Mövenpick Resort Al Nawras in Jeddah, 99 per cent of our visitors are families from Riyadh and Al Khobar. There is growth in resorts catering for the needs of Saudi families taking short breaks, a segment that has grown significantly over the last five years.
The average Saudi family takes at least three holidays a year – generally one holiday is outside the country. But during the major Islamic holidays, they often take short breaks inside Saudi Arabia. Events such as Jeddah’s summer shopping festival are becoming very popular with families from Riyadh
What is the key to developing in Saudi Arabia and how have you found good local partners? Can you tell me who your local partners are?
Many owners have an emotional bond to a particular brand so need to know that it is in capable hands. This is especially true in Saudi Arabia where one of the critical factors for success is reputation.
We have built solid relationships with our owners and potential investors there through our knowledge and experience of the culture and local customs as well as a proven track record with our existing hotels.
Is there more opportunity in the luxe category versus limited service?
Yes, there is certainly a need for an additional supply of 5-star rooms across Saudi Arabia particularly in Riyadh because of the demand from the corporate, government and conference segments. The higher per capita spend of the business traveler means that the demand for luxury items will remain high especially in the accommodation sector.
The boom in the building of mega cities such as King Abdullah City and the expansion outwards of Riyadh means that there will be a greater demand of quality accommodation in future years.
Our latest opening in Al Khobar has already been well received by the local market because it is by far the most luxurious hotel in the city to date. We anticipate the same reaction to our opening of our 5-star hotel in Riyadh next year.
Where in Saudi are the best opportunities for development and performance?
Traditionally, both Riyadh and the Eastern Province cities have been undersupplied with business hotels. Now, there is a flurry of new investment in luxury apartments and hotels, to serve growth in government and business tourism.
And with the massive new projects underway in Saudi Arabia – from the new industrial cities to infrastructure – there has been a flood of demand for hotel space from business travelers.
Jean-Paul Herzog, President, Hilton Hotels, Middle East & Africa
Can you tell me about Hilton's development plans in Saudi Arabia? Please offer as many specifics as possible.
The GCC has been identified as one of Hilton's top five international markets for development - in particular the UAE, Saudi Arabia and Bahrain. These markets have the potential to redefine Hilton’s future in the region. We are paying special attention to the growing needs of Saudi Arabia by ensuring that our expansion plans and projects are in sync with the region’s tourism ambitions. We already have a presence in Jeddah, Makkah and Madinah with five hotels. Riyadh has been identified as the next key development focus for us. Our immediate expansion plans will drive the presence of our core brand Hilton and our luxury brands, The Waldorf=Astoria Collection and Conrad. We are also identifying opportunities for Doubletree by Hilton, an upscale full service product and Hilton Garden Inn, a mid-market brand – all offering affordable accommodation, while simultaneously carrying the quality assurance associated with the Hilton name.
Are you aware of the Kingdom's new push for tourism and what are your thoughts about it?
Yes, definitely .The Tourism Higher Authority (THA) has taken significant steps to further the Kingdom’s tourism potential. Jeddah's new King Abdul Aziz International Airport will have a capacity for 50 million people, thanks to a USD 8 billion investment. Saudi Arabian Airlines is expected to acquire over 90 new aircraft at a cost of USD 12 billion. The Kingdom has USD184 billion in leisure investment. In addition, the country is currently on a major spending spree to launch some ambitious infrastructure developments. These include the King Abdullah University on the outskirts of Jeddah which aims to become the leading university of the Middle East attracting students from around the world. There is also a major railroad link in its final planning process which will link the Ports of Jubail (Arabian Gulf) to the capital of Riyadh and from there to the Port of Jeddah (Red Sea). Furthermore, H.M. King Abdullah is developing six ‘economic cities’ in various rural areas of the Kingdom, the first of these will be King Abdullah City located about an hour's drive from Jeddah.
Alongside the staple of religious tourism, Saudi Arabia boasts a growing potential for major national and international conferences. The THA has realized the immense potential in developing domestic tourism with an estimated five million Saudis travelling abroad annually. Domestic tourism is expected to generate around SR101 billion by 2020.
These developments are testament to the country's tremendous growth potential, and present prospective business opportunities for our hotels in Saudi Arabia, and for further growth of our Hilton Family of Brands.
How much potential does Saudi Arabia hold for Hilton? Is it more business or potentially regional leisure travel?
Both. Saudi is the region’s largest economy with a swelling population and a strong focus on economic diversification. The government is looking to develop Saudi as a key player in the region’s tourism landscape. In recent years many Saudi cities have played host to major regional and international conferences and events.
As stressed earlier domestic tourism is another lucrative segment where leisure travelers will be the focus, domestic tourism is expected to generate around SR101 billion by 2020. To meet this demand, in 2006 we opened our first palace property in Jeddah - the 46-all-suite Qasr Al Sharq (Palace of the Orient) and a member of our prestigious The Waldorf=Astoria Collection. The palace has redefined Saudi Arabia's booming tourism and hospitality sector, with a host of first-ever amenities including the largest guest suites in the region and a personalized butler service.
What is the key to developing in Saudi Arabia and how have you found good local partners? Can you tell me who your local partners are?
Over 75% of the projects in our regional pipeline are with owners of existing operations, this is testament to the importance we place on cultivating healthy and lasting relationships. The Kingdom has always welcomed us with great understanding and support, directly reflected in the open and easy relationships we share with our local partners. Undoubtedly awareness and understanding is at the heart of running a successful operation.
Is there more opportunity in the luxe category versus limited service?
As explained earlier in a market as expansive and diverse as Saudi Arabia there is room for all service points. We strongly believe that as domestic tourism develops so will the diversity of travelers to the kingdom and alongside a consumer mandate for choice. We aim to meet this anticipated need with the roll out of the Hilton Family of Brands. Our immediate expansion plans will drive the presence of our core brand Hilton and our luxury brands, The Waldorf=Astoria Collection and Conrad. We are also identifying opportunities for Doubletree by Hilton, an upscale full service product and Hilton Garden Inn, a midmarket brand – all affordable accommodation, while simultaneously carrying the quality assurance associated with the Hilton name.
Where in Saudi are the best opportunities for development and performance?
We already have a strong presence in Jeddah, Makkah and Madinah, therefore our development efforts now are focused on Riyadh where there is tremendous opportunity to establish our brands. We are truly committed to sustaining the Kingdom's thriving tourism infrastructure.
Imad Elias, executive vice president and COO, Rotana
Can you tell me about Rotana's development plans in Saudi Arabia? Please offer as many specifics as possible.
Rotana have just signed a management agreement with Jiwar Real Estate Management & Marketing Company to manage its first property in Saudi Arabia and specifically in Makkah, under its’ newly launched brand Rayhaan Hotels & Resorts by Rotana.
Rayhaan Al Marwa Hotel, is part of Al Bayt Towers complex, will provide state-of-the-art, five-star service and will include more than 1000 rooms and suites in addition to restaurants. Besides its exceptional services, the hotel will also welcome pilgrims and guests from around the world, providing them with a variety of facilities and choices that meet their needs. The hotel includes 27 elevators which guarantee the fast and comfortable movement of guests keen to meet the prayer's call.
Rayhaan Al Marwa is situated on the right side of Al Bayt Towers projects, which faces King Abdul Aziz Gate. Major units of the tower have an overview of the Holy Mosque and the Ka’aba. Rayhaan Al Marwa units were designed as studios, which would satisfy both the customer and the investors. Theses studios provided with features found in high-end hotels.
We are currently working on an immense project to develop 15 hotels in Saudi Arabia and this will be announced in due course.
Are you aware of the Kingdom's new push for tourism and what are your thoughts about it?
Absolutely. The kingdom of Saudi Arabia has increased its focus on developing its tourism industry. Besides the millions who come on Hajj and Umrah pilgrimages, to attract more leisure tourists, the Saudi government is undertaking significant reform and investment in large projects, such as publicly financed training programs and public-private development partnerships to boost tourism.
One of the most significant impacts of stronger government interest is the easing of visa controls and travel restrictions within Saudi Arabia in 2006 and 2007. This has had a positive impact on travel retail, which benefited from increased revenue as tourist numbers rose.
In the past, all visitors entering Saudi Arabia either had to be invited by a company for business travel, or by an individual for leisure travel. The process of obtaining a non-religious visa was a long and cumbersome one that discouraged foreigners from visiting the kingdom. Therefore, in order to diversify the types of visitors, Saudi Arabia is aiming to encourage leisure travel through major campaigns. This is to create awareness around the world that Saudi Arabia is a possible holiday destination. Since 2006, travel agencies have been granted the right to sponsor tourists. This reduces the processing time for visa and enables more foreigners to enter the kingdom easily. To bring about a more diverse tourist base, European and Asian tourists are being targeted by Saudi Arabian travel agents. Not forgetting religious tourists, promotions are being run with the aim of encouraging this group to take longer stays, to pursue leisure activities such as shopping, as well as cultural visits and historical exploration within the kingdom.
The liberalization of Saudi Arabia's air transportation has not only transformed travel within the kingdom but also within the Middle East. With the aid of measures implemented by the government, such as issuing licenses for private carriers, more competition is being introduced into this category. The opening of Saudi skies is a tonic to the travel and tourism industry. Increased air links, services and affordability will promote travel within and outside of the kingdom. Growth can be seen as air arrivals grew by 65% while air departures grew 16% over the review period.
How much potential does Saudi Arabia hold for Rotana? Is it more business or potentially regional leisure travel?
Tremendous potential indeed. Rotana was approached by many developers in the last few years but we had to wait for the right opportunity to get into the market.
Islamic tourism is one of the main business models promoted by the government and has been deftly embraced by the private sector in order to diversify tourism and protect it against the risk of geopolitical conflicts.
The concept of Islamic tourism can only develop its full potential with the improvement of inter-regional travel and visa endorsements. Security and stability are key ingredients for new investment and innovative tour programmes. Inter-Arab and inter-Muslim tourism can contribute to stabilising the national tourism industry. The introduction of a multi-layered concept that integrates cultural, religious and recreational pursuits may have the ability to successfully increase tourism growth. Given the strength of the Saudi economy, by default a tourism sector emerged.
Following many surveys, the government found that about 60 percent of Saudi tourist expenditure is spent in Saudi Arabia rather than outside the kingdom.
Rotana’s objective is to develop a quality product to cater to Saudis, to Arab visitors, to Muslim visitors and to cater to special niche markets that are looking at the cultural heritage aspect of Saudi Arabia.
What is the key to developing in Saudi Arabia and how have you found good local partners? Can you tell me who your local partners are?
The knowledge of the market, its’ needs and certainly having the contacts. In addition to signing our first property in Makkah, we are also setting up our Sales Office in Jeddah, which will assist with our expansion in Saudi Arabia and will take care of the inbound and outbound business.
Our first local developer/owner is Jiwar Real Estate Management & Marketing Company which is one of the leading real estate companies in the Kingdom of Saudi Arabia and the Gulf region based in Riyadh, and is the marketing arm of Binladen Group in Saudi Arabia. We will be announcing the new joint ventures and partnerships in due course.
Is there more opportunity in the luxe category versus limited service?
There is a huge untapped potential for leisure tourism in Saudi Arabia. Mid-range and budget accommodation offers attractive options as Saudi Arabia looks to target mass tourism.
The emergence of mid-range and low cost hotels has become one of the hottest trends within travel accommodation, introducing an essential diversity into the hotel category.
Where in Saudi are the best opportunities for development and performance?
Across Saudi Arabia but mainly Jeddah, Makkah and the East Coast. Riyad, Jubeil, Yanbou are also potential for the growing oil sector.
View All Blogs
