2007 Saudi Arabia Country Snapshot

Transcription

1 2007 Saudi Arabia Country Snapshot Hadrien Pujol, Associate Director Bernard Forster, Director HVS INTERNATIONAL LONDON 7-10 Chandos Street London W1G 9DQ (Fax) April 2007 New York San Francisco Boulder Denver Miami Dallas Chicago Washington, D.C. Weston, CT Phoenix Mt. Lakes, NJ Vancouver Toronto London Madrid New Delhi Singapore Hong Kong Sydney São Paulo Buenos Aires Newport, RI

2 Saudi Arabia Snapshot London office of HVS International Hadrien Pujol and Bernard Forster Economics and Politics 2006 was marked by the significant fall in the Tadawul All Share Index ( TASI ). However, the macroeconomic environment was not affected by the TASI losing approximately half of its value since its peak in February For the fourth year in a row, Saudi Arabia s budget surplus beat expectations and is estimated at US$14.7 billion for According to the EIU, Saudi Arabia s economy grew by 4.2% in The government is pursuing a development strategy focused on diversification away from reliance on petrochemicals and creating employment for the growing population. On the domestic political scene, the government policy on eliminating terrorism seems to have borne fruit with no major incidents occurring in On the international scene, Saudi Arabia is taking initiatives to maintain the country s position as the regional leader. Developments and Initiatives Work on a US$1.5 billion expansion of King Abdulaziz International Airport in Jeddah has started. The construction of two new terminals is set to increase capacity to 21 million passengers by Saudi Arabia s fifth economic city will be in the northern region of Tabuk. In less than a year, King Abdullah has launched four economic cities in Rabigh, Hail, Madinah and Jizan, heralding a new era of regional development. The first city focuses on promoting energy- and transportation-related industries. The second (Prince Abdul Aziz Bin Mousaed Economic City) focuses on transportation and related logistical services. The third city in Al Madinah, which was launched in June 2006, will house knowledge-based industries. Jizan Economic City will have a port, an industrial zone, a logistic service centre, an energy/desalination plant and a residential zone. According to the Saudi Arabian General Investment Authority (SAGIA), the four cities are expected to attract

3 investments worth more than US$80 billion and create more than one million jobs within the next ten to twenty years. Visitation and the Hotel Market Visitation to Saudi Arabia emanates from Muslim countries, with 70% of visitors originating from Middle Eastern countries and 14% from Southeast Asia in Data for the first three quarters of 2006 show a 10% increase in visitor arrivals and a staggering 43% growth in room nights. Religious and business tourism account for more than 70% of total visitation. Following the low level of occupancy rates observed at quality hotels in Jeddah in 2003 and 2004, marketwide occupancy increased by three percentage points to 64% in Average rate in this market posted a modest decrease of 5% to US$137 in As a result, RevPAR was unchanged at US$87 whilst GOPPAR posted a 4% decline to US$69 in 2006 compared to US$72 in 2005, which is explained by the decrease in average rate. We note that quality hotels in Jeddah enjoy a strong commercial demand base. Marketwide occupancy for quality hotels in Riyadh experienced considerable growth to 70% in 2006 compared to approximately 62% in Average rate in the market witnessed an impressive growth of 29% in 2006, to US$142. As a result, RevPAR increased by an unprecedented 47% to US$100, while GOPPAR increased from US$56 in 2005 to US$79 in The increase in liquidity and disposable income of domestic travellers as well as the numerous infrastructure developments in the country led to a boom in 2006 hotel performance. Quality hotel markets in Madina and Makkah also recorded increases in performance, largely driven by increases in occupancy. On a similar note, Damman and Al Khobar enjoyed good performances in As illustrated below, there are numerous developments announced in the holy cities and eastern province by major international hotel companies.

4 Proposed Hotels Saudi Arabia Hotel Name Number of Rooms Opening Date Location InterContinental Al Khobar Crowne Plaza Al Khobar Park Inn Al Khobar Mövenpick Hotel Al Khobar Al Khobar Mövenpick Hotel Bureidah Bureidah Rosewood Hotel Jeddah ZamZam Sofitel Grand Suites 1, Makkah Mercure Al Azizia Makkah Holiday Inn Al Qasr Riyadh Novotel Al Anoud Riyadh Sofitel Al Khobar Al Khobar Holiday Inn Red Sea Palace Jeddah Tulip Inn Jeddah Crowne Plaza Madinah Madinah Mövenpick Hotel & Residence Hajar Tower Makkah Park Inn Riyadh Tulip Inn Riyadh Mövenpick Hotel Riyadh Riyadh Mövenpick Hotel Yanbu Yanbu 2009 Openings Source: HVS Research Outlook and Opportunities The numerous developments opening in 2007 are likely to sustain the high level of demand for hotel accommodation in the short term. We expect average rates to increase in the holy cities and in Riyadh in Increased liquidity and disposable income are likely to drive domestic leisure in The majority of existing quality hotels in Saudi Arabia are somewhat aged and with numerous hotels undertaking refurbishment programmes, high occupancy levels will remain in In terms of hotel investment, there is a strong development pipeline of new hotels in Saudi Arabia. We expect new developments of hotel derivatives, such as condo hotels, in the holy cities in the short term.

5 No investment decision should be made based on the information in this survey. For further advice please contact the authors. About our Team HVS International has a team of Middle East experts that conducts our operations in the MENA region. The team benefits from international and local cultural backgrounds, diverse academic and hotel-related experience, in-depth expertise in the hotel markets in the MENA region and a broad exposure to international hotel markets in Europe. Over the last 24 months, the team has advised on more than 100 hotels or projects in the region for hotel owners, lenders, investors and operators. Together, HVS has advised on more than US$10 billion worth of hotel real estate in the region. About the Authors Hadrien Pujol is an Associate Director with HVS s London office. He joined HVS in 2004 and has five years operational experience in the hospitality industry in Europe. Originally from Carcassonne, France, Hadrien holds an MBA from IMHI (Essec Business School France and Cornell University USA) and Diplomas in Hotel Operations from the Lycée Hotelier Savoie Léman, Thonon Les Bains and the Lycée Hotelier Quercy Périgord, Souillac. Hadrien is currently preparing his MSc in Corporate Real Estate Finance and Strategy at Cass Business School in London. Since joining HVS he has advised owners on many hotel and hotel-related investment projects and strategic developments in Europe, the Middle East and Africa. Bernard Forster is a Director with HVS s London office, heading the MENA region. He joined the company in 1997 from Accor Hotels & Resorts where he focussed on property management systems, yield management and guest-history systems in Europe, the Middle East and Africa. Previously, Bernard worked in various operational management roles for the Savoy Group (now Maybourne Group) in London as well as for the Dolder Grand Hotel in Zürich. Bernard holds an MSc in Property Investment from City University, London; a BSc (Hons) in Hotel Management from Oxford Brookes University; and a diploma in Hotel Administration from Institut Hotelier Cesar Ritz, Le Bouveret, Switzerland.