Religious tourism expected to generate bookings at Saudi hotels

Religious tourism in Saudi Arabia’s pilgrim cities is expected to drive the hotels sector as their performance in Riyadh and Jeddah slow down.

During the second quarter, the average occupancy rates in Mecca and Medina rose by 13 per cent and 4 per cent year-on-year, respectively, while those in Riyadh and Jeddah declined by 12 per cent and 4 per cent, respectively, according to Colliers International.

The average daily rates also suffered in Riyadh, declining by 11 per cent during the second quarter, year-on-year. In Mecca, the rates rose by 30 per cent and in Medina by 4 per cent year-on-year. The absolute figures were not available. Mecca expects to have 24,185 rooms in 2018, up from about 16,000 rooms this year, the largest inventory in the country.

During June, Mecca hotels reported a 24 per cent increase year-on-year in the average occupancy rate to touch 80.7 per cent thanks to Ram­adan demand, according to Colliers. The average daily rate was US$467, up 70 per cent year-on-year.

About 89 per cent of the properties in Mecca are five-star with the remaining four-star. Spurred by the demand, international operators are also heading to the city. By 2020, IHG expects to be the largest operator there with 7,424 rooms, followed by Hilton Worldwide at 4,387 and Saudi Arabia’s Elaf Hotels at 3,875 rooms.

Starwood Hotels and Resorts Worldwide said it would operate a Sheraton in Mecca expected to open in the fourth quarter. The Riyadh-listed Altayyar Travel Group owns the Sheraton Makkah Jabal Al Kaaba, which will have 304 rooms and 110 serviced apartments.

“With the growth of religious travel into Saudi Arabia, there continues to be a strong demand for hotels within the holy city,” said Neil George, the senior vice president for acquisitions and development for Starwood Hotels and Resorts for Africa and the Middle East.

Saudi Arabia is Starwood’s second-largest market in the Middle East after the UAE with 10 hotels and 3,229 rooms, with three in Mecca and Medina. Its largest property in the country is in Mecca with 962 rooms. It has 13 properties in the pipeline until 2022, with five of them in Mecca, including the new Sheraton.

About 6 million Umra pilgrims are expected to arrive in Medina alone for the Haj season this year, a figure similar as last year, according to the Saudi ministry of Haj and Umra this month.

“The continued growth in religious tourism is a positive development that signals that the kingdom is on the right track in its national economic plan,” said Ziyad Bin Mahfouz, the chief executive of the Elaf Group in Jeddah. “Religious tourism will significantly contribute to the country’s shift towards the post-oil era.”

Elaf Group has 11 properties in Mecca and Medina.

In Riyadh, hotels reported a drop in revenues because of a lack of corporate business travellers. There was a decline in the conference and banqueting segment of 23.3 per cent during June year-on-year in Riyadh, according to Hotstats data.

A drop in oil prices has led to a shift in Saudi Arabia’s strategy to boost the economy, with a ­focus on domestic tourism.

Brent crude was at $47.18 per barrel on Monday. That is down from $103.53 per barrel two years ago, before the prices began to drop.

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