Gulf Construction Online - Poised for an upsurge

Hotels & Palaces

Radisson Collection’s Mansard Riyadh ... on the cards.

Poised for an upsurge

Hotel projects worth an estimated $30 billion are expected to be built within the next five years to meet the anticipated surge in the number of tourists to the region.

01 November 2019

The region’s hospitality sector is expected to see boom times ahead with some $30 billion worth of hotel construction contracts likely to be awarded in the Middle East and North Africa between now and 2023.

The upsurge in hotel construction is anticipated in the wake of the recent all-out efforts being made by the GCC goverments to woo global tourists to the region.

According Ed James, director of content and analysis at leading projects tracking service, Meed Projects, just under $30 billion worth of hotels are due to be awarded in the region over the next five years with the UAE leading the way with almost $11 billion worth of planned and un-awarded hotel projects.

Hotels like the upcoming Kempinski Hotel Makkah are aimed at accommodating the surging number of religious tourists.

In the longer term, however, Saudi Arabia is likely to dominate the hotel construction market gauging by its recent mega projects aimed at enticing both the domestic and global tourist. The kingdom has also eased visa restrictions considerably over the past few months.

Last month, Saudi Arabia launched a tourist e-Visa, a first for the country which so far did not allow foreigners to enter purely for tourism purposes. Those eligible for the new tourist e-Visa include nationals of 49 countries including those in the Schengen area as well as the US, Australia, Japan, South Korea, South Africa, Malaysia, Singapore, and Brunei.

Saudi Arabia is definitely on the radar for hotel operators looking to expand in the region, given the kingdom’s ambitions for its $500-billion futuristic Neom City; the Red Sea Development along the Red Sea encompassing 90 islands and combining sea, sand dunes and mountains; Amaala on the northwestern coast of the Red Sea; the history-steeped Diriyah Gate Development; and Qiddiya in Riyadh, which is designed to be a pre-eminent entertainment, sports, and cultural destination.

The tourism and hospitality industry was the second most important non-oil contributor to the kingdom’s GDP which, according to the World Travel and Tourism Council, was estimated at SR240.9 billion ($64.23 billion) or 9.4 per cent of total GDP in 2017. With government investment fuelling rapid growth in the industry, the sector’s value is forecast to grow to SR400 billion by 2028, says TRI Consulting, a leading consultant specialising in hospitality, leisure and real estate.

Hence, it comes as no surprise that in terms of the hotel construction pipeline, Saudi Arabia is virtually neck and neck with the UAE – which has traditionally dominated the pipeline for the Middle East. According to a report released in September by Lodging Econometrics (LE), a leading provider of global hotel intelligence, Saudi Arabia currently has 217 projects in its hotel construction pipeline but with a larger number of rooms than the UAE, at 73,647. The UAE has the highest number of projects in the construction pipeline at 219 projects with 61,781 rooms.

Egypt follows, at an all-time high, with 63 projects and 15,353 rooms and then Qatar with 59 projects and a record-setting 15,002 rooms, the report says.

Analysts at LE indicate that the Middle East hotel construction pipeline stands at 640 projects comprising 181,890 rooms, up six per cent and four per cent, respectively, year-over-year (YOY). This is an all-time high for projects in the region, according to the report.

Some 345 projects with 111,257 rooms are presently under construction and, in the next year, work is expected to start on 160 other projects featuring 39,373 rooms. A further 135 projects/31,260 rooms are in the early planning stage, the report says.

The Middle East opened 42 new hotels comprising 10,793 rooms in the first half of 2019 with another 59 new hotels with 12,418 rooms scheduled to open by the year-end.

In 2020, new hotel openings are forecast to climb to 124 hotels offering 37,233 rooms and rising further in 2021 to 139 new hotels with 38,270 rooms, say the analysts.

In the UAE, Dubai’s construction pipeline continues to dominate over other emirates with 173 projects including 50,832 rooms. Dubai alone accounts for 27 per cent of the projects in the Middle East pipeline. Other emirates with noteworthy hotel construction pipelines is Abu Dhabi with 16 projects offering 3,938 rooms, Ras Al Khaimah with 14 projects with 4,294 rooms, and Sharjah with 14 projects comprising 2,330 rooms.

Regionwise in Saudi Arabia, the Eastern Province has a hotel construction pipeline of 63 projects featuring 12,752 rooms; Riyadh with 60 projects/11,547 rooms; Jeddah with 56 projects/11,566 rooms; and Makkah follows with 38 projects/37,782 rooms.

As one of the fastest growing hotel chains in Saudi Arabia, the Radisson Hotel Group currently has over 40 hotels, resorts and serviced apartments with 10,000 rooms in operation and under development.

Following the recent opening of Park Inn by Radisson Makkah Aziziyah in July, Radisson Hotel Group is set to launch two new midscale signature Park Inn hotels by Q4 this year, Park Inn by Radisson Hotel Riyadh and Park Inn by Radisson Jeddah Madinah Road. Radisson has recently just announced the signing of its second Radisson Collection property in Riyadh, the Mansard Riyadh

In the region, Lodging Econometrics says AccorHotels has the largest pipeline with 106 projects/28,580 rooms. Next is Marriott International with 98 projects/22,401 rooms and then Hilton Worldwide with 96 projects/26,638 rooms.

The leading pipeline brands for AccorHotels are the Ibis brands with 19 projects/6,147 rooms and Novotel with 16 projects/5,060 rooms. Marriott’s prominent brands are Courtyard with 21 projects/4,459 rooms and Residence Inn with 16 projects/1,877 rooms, both of which are recording their highest pipeline counts by projects and rooms.

Hilton’s top brands are DoubleTree, at an all-time high for projects and rooms with 29 projects/7,691 rooms, and full-service Hilton Hotels & Resorts with 24 projects/7,393 rooms

Residences

Meanwhile, branded residences are the buzzword in the region with several developers turning to international hotel chains, fashion houses and automobile brands to boost the USPs of their projects.

According to a report by real estate expert Savills, coinciding with Expo 2020, Dubai is set to overtake New York as the global branded residences capital by the year-end, thanks to a pipeline equal to its current supply of just over 20 schemes.

Marriott International, whose brands include Ritz Carlton, St Regis and W, is the market leader and is set to remain so. However, Accor is rising fast and has a pipeline equal to Marriott International, states the expert.

In the Middle East, Emaar Hospitality Group is growing fast with an extensive pipeline across the UAE and wider Middle East under its Address and Vida brands, it adds.