Saudi Arabia has more than 64,000 rooms across the three phases of the hotel development pipeline, according to data released by STR. The room total represents 76% of the existing hotel rooms in the kingdom, which is more than 84,500.
Currently, there are 187 hotel projects in between the 'planning', 'final planning' and 'in construction' stages in Saudi Arabia, according to STR’s January pipeline report. The construction phase takes up the largest portion of the pipeline with approximately 40,000 rooms in 94 projects.
Makkah will receive the highest supply of hotel rooms with more than 23,000 in construction and more than 32,000 in the pipeline. Jeddah and Riyadh are both approaching 10,000 rooms through the three phases of construction.
STR area director for the Middle East and Africa Philip Wooller says the country is going through a phase of massive supply.
“In the short term, we’ve already seen this growth affect performance levels, and this trend should continue as more and more properties start to come online. But it is important to note that this is part of a major long-term investment for the market to further develop its infrastructure to accommodate millions of annual visitors, which come for religious pilgrimages and as new tourism attractions spring up as part of Vision 2030,” Wooller noted.
Vision 2030, which was announced in 2017, is an initiative aimed at reducing the country’s dependence on oil and the plan included investments into the tourism sectors, Wooller pointed out.
In 2017, the country recorded a 5.2% decline in occupancy and a 4.4% drop in average daily rate (ADR), resulting in a 9.3% decline in revenue per available room (RevPAR) compared with 2016. Figures for January 2018 show that occupancy rose 6.4%, while ADR dropped 5.2%, resulting in a year-over-year RevPAR increase of 0.9%, the STR report stated.
As oil prices continue to rise, Wooller said Saudi Arabia will begin to see performance levels start to recuperate over time. But in the long run, he said the tourism investments will help the country’s hotel industry withstand the market during future lower periods of oil prices.