Riyadh: The hospitality market in Jeddah will receive more than 4,000 new hotel rooms in the coming three years, increasing the current inventory by 35 per cent, according to the latest real estate report by KPMG Al Fozan & Partners, a leading audit, tax and advisory services provider in Saudi Arabia.
Jeddah's hospitality market showed an upward trend in key performance indicators (KPIs) in 2018, driven by a surge in tourist numbers and limited supply during the year following a dwindling performance during 2016–17.
KPMG report expects the market to remain subdued in the short term owing to the bulk of supply due to deliver in 2019. However, the market is expected to witness a steady performance in the long term, backed by the government’s initiatives to support the development of culture, leisure and entertainment projects in Jeddah. Furthermore, the growing number of pilgrims will have a positive impact on the hospitality market of Jeddah.
"Despite the forthcoming supply putting a downward pressure on the performance in the short term, we believe that the demand for hospitality units in Jeddah is likely to remain robust due to which the market is expected to recover in the medium to long term, backed by the government’s initiatives to support the development of culture, leisure and entertainment projects," commented Firas Hassan, Head of Real Estate at KPMG Al Fozan and Partners.
The KPMG report foresees a diminishing trend in occupancy rates and average daily rates (ADRs) in the upscale market segment, primarily due to increased competition.
"Lack of three-star hotels in Jeddah, offers a solid investment option for potential investors. As the number of business travelers grows in the Kingdom, budget constraints from companies are fueling demand for three-star hotels. Further, the demand stems from tourists who cannot afford to stay in expensive four- and five-star hotels and choose to stay in unbranded hotels or service apartments due to lack of quality offering in this asset class," Hassan said.
Meanwhile, Riyadh will see supply of 2,500 new hotel rooms in 2019, bringing the total number to 16,000 rooms. The future supply in the Saudi capital is expected to rise by 52 per cent in the next five years. In 2018, 1,700 keys entered the market in the 3-, 4- and 5-star categories.
Despite occupancy rates improving by 6 per cent to 53 per cent in 2018, ADR and revenue per available room (RevPAR) fell by 10 per cent and 8 per cent, respectively.
Despite a broad range of investment opportunities offered in the leisure and entertainment sector, recovery of the real estate market in Riyadh is expected to be led by the hospitality and leisure sectors.
"We expect limited improvement in performance in 2019 compared to last year, as supply continues to increase, occupancy levels and ADR decline moderate and heavy reliance on business travellers," stated Hassan.
-Ends-
© Press Release 2019Disclaimer: The contents of this press release was provided from an external third party provider. This website is not responsible for, and does not control, such external content. This content is provided on an “as is” and “as available” basis and has not been edited in any way. Neither this website nor our affiliates guarantee the accuracy of or endorse the views or opinions expressed in this press release.
The press release is provided for informational purposes only. The content does not provide tax, legal or investment advice or opinion regarding the suitability, value or profitability of any particular security, portfolio or investment strategy. Neither this website nor our affiliates shall be liable for any errors or inaccuracies in the content, or for any actions taken by you in reliance thereon. You expressly agree that your use of the information within this article is at your sole risk.
To the fullest extent permitted by applicable law, this website, its parent company, its subsidiaries, its affiliates and the respective shareholders, directors, officers, employees, agents, advertisers, content providers and licensors will not be liable (jointly or severally) to you for any direct, indirect, consequential, special, incidental, punitive or exemplary damages, including without limitation, lost profits, lost savings and lost revenues, whether in negligence, tort, contract or any other theory of liability, even if the parties have been advised of the possibility or could have foreseen any such damages.
