AS THE POLITICAL, FINANCIAL, AND ADMINISTRATIVE CENTRE OF THE COUNTRY, RIYADH HAS GROWN INTO A HUB FOR CORPORATE TRAVEL. HOWEVER, THIS PREVIOUSLY LUCRATIVE SECTOR HAS DIMINISHED IN RECENT TIMES, A TREND THAT HAS BECOME ESPECIALLY APPARENT IN RIYADH.
While noting that so far this year business is relatively similar to 2016, Tarek Bekhiet, regional director, Four Seasons Hotel Riyadh, indeed confirmed that the majority of the property’s guests are intraregional business travellers from the GCC, the UK and the US, an indicator of how valuable the corporate segment is to hoteliers in the capital.
In fact, considered to be reliant on business tourism, the travel industry in Riyadh continues to be stifled by the ongoing impact of falling oil prices, which has caused a reduction in both economic growth and the number of business trips undertaken.
As revealed in Hotstats’ MENA Chain Hotels Market Review January 2017, in 2016, hoteliers recorded a 24 percent plummet in profit per room, a trend which continued into January, during which a 16.2 percent year-on-year fall in this measure was observed.
Furthermore, there was a 13.9 percent fall in RevPAR compared to January 2016, despite addresses in Riyadh successfully saving 10.2 percent in payroll and 10.5 percent in overheads.
As a result of declining revenue in food and beverage as well as conference and banqueting, down 15 percent and 20.1 percent, respectively, total revenue dropped 14.3 percent over the same period in 2016.
Elaborating on this, Diane Daudin-Clavaud, director, communications and public relations, Nobu Hotel Riyadh, provided further insight into the first quarter (Q1) of this year, describing a year-on-year decrease in RevPAR of 8.8 percent and a 10.3 percent drop in average daily rate.
On a more positive note, she highlighted that during the first three months of the year, occupancy grew 1.7 percent.
WINDS OF CHANGE
In line with its commitment to boosting the tourism industry, Saudi Commission for Tourism and National Heritage (SCTH) has been allocated its biggest ever budget, 79 percent higher than the 2016 fiscal year.
Of the total SAR1.11billion (USD296 million) of funding, SAR216 million (USD57.59 million) has been earmarked for tourism, a year-on-year surge of 52 percent, and a gauge of how seriously Saudi Arabia is taking tourism.
Furthermore, SCTH recently revealed an initiative to lend a total of SAR2.7 billion (USD720 million) for tourism and hotel projects. Despite the fact that hotels in the capital are battling to sustain the pre-oil collapse levels, Riyadh has a significant number of hotel developments in the making.
More specifically, Riyadh has been lauded as the country’s busiest city in terms of hotel construction, with a remarkable 48 projects underway, as revealed in TOPHOTELPROJECT’s The 2017 Saudi Arabia Hotel Construction Overview, prepared for The Hotel Show Saudi Arabia.
This includes a number of international brands, thought to have been influenced by the announcement of Saudi Vision 2030 and the monumental potential that it will bring.
Of these, approximately 2,500 rooms are expected to be delivered this year, including Fairmont Riyadh Business Gate, Crowne Plaza ITCC and Swiss-Belhotel Riyadh as well as three Hilton Hotels & Resorts-branded addresses.
In Q1, 261 units were added to the city, bringing its total stock to around 11,900 keys, according to Jones Lang LaSalle’s Riyadh 2017 Q1 Real Estate Market Overview.
Yet, this is viewed as nothing short of positive. While explaining that ADR is likely to further decrease, Daudin-Clavaud added that occupancy, total revenue as well as the number of flights and travellers are all set to soar.
Recognising that a rise in supply will ensure better service from hoteliers in order to differentiate themselves and to retain guests, Bekhiet further exemplified, “Such investments lead to increase in competition, which I believe creates a healthy competitive environment.
It challenges us to push out limits of creativity and always seek more innovative strategies to excel in the market.”