Quarterly Report

Saudi Arabia | Hotels

Q1 2016

Saudi Arabia Q1 2016 Review

5 Key Cities
 Contents
Riyadh ...................................................... 3

Jeddah ..................................................... 4

Makkah .................................................... 5

Madinah ................................................... 6

Khobar, Dammam & Dhahran .................. 7

2 Saudi Arabia Q1 2016 Review | May 2016 | Hotels | Colliers International

Riyadh PROJECTED HOTEL SUPPLY │NO. OF KEYS

SUPPLY 15,720
13,289
Notable hotels currently in the pre-opening phase include 9,993
the Nobu Riyadh, the Crowne Plaza ITCC and the Hyatt 7,473
6,081
Regency Olaya, all of which are expected to officially open
within the next 2 months.
Q1 2015 Q1 2016 FY 2016(f) FY 2017 (f) FY 2018 (f)
Source: Colliers International
Riyadh s pipeline is centred around 4-and 5-star room Note: The above graph covers only branded hotel supply, and takes into account potential
cancellations and delays.
stock accounting for 53% and 41% of supply respectively
while 3-star supply represents the remaining 6%.
The current market gap is for internationally branded 3-star
KPIs | YOY % CHANGE
hotels, which would see a good fit in Riyadh s corporate-
focused market.
+6% +0% -6% -9%
Occ 52%
MARKET PERFORMANCE OCC
Corporate demand represents 70% of roomnights booked in
Riyadh. Due to a decline in oil prices, corporations have +1% -6%
-7% -10%
been less willing to spend on rooms due to cost-cutting USD 220
tactics. This has resulted in a gradual dip in ADR witnessed
from Q3 2015 until Q1 2016. ADR Q1 Q1 Q1 Forecast
2014 2015 2016 FY 2016
In addition, occupancies have faltered due to lower
business travels however this is expected to pick up RevPAR
should oil prices recover. Source: STR Global, Colliers International

OUTLOOK
WHAT TO EXPECT?
Low oil prices are expected to continue shifting demand
towards more affordable travel and accommodation options
Midscale and Demand is expected to shift
as companies implement cost reduction initiatives. Economy towards midscale and economy
Hotels hotels amidst reduced spending
Some parts of King Abdullah Financial District are expected on travel and accommodation.
to be repurposed into hotels, which would result in further
Price Reduced oil prices expected to
increases in hotel supply.
Sensitivity continue suppressing corporate
Investors in hospitality real estate should have a long term demand and apply pressure on
view in mind and build assets which are able to target the achievable rates.

domestic leisure market, as existing properties in Riyadh Overhaul of Saudi Vision 2030 calls for an
are mainly focused on the corporate segment. Development overhaul of planned economic
Plans cities.

3 Saudi Arabia Q1 2016 Review | May 2016 | Hotels | Colliers International

Jeddah PROJECTED HOTEL SUPPLY │NO. OF KEYS

10,700
SUPPLY
7,815
Jeddah has historically experienced delays in hotel
5,926
development, with some projects also being put on hold 4,145
4,924
indefinitely.
53% of Jeddah s branded hotel supply is represented by Q1 2015 Q1 2016 FY 2016(f) FY 2017 (f) FY 2018 (f)
the 5-star segment, while the 4-star and 3-star segments Source: Colliers International
Note: The above graph covers only branded hotel supply, and takes into account potential
account for 29% and 18%, respectively. With regards to the cancellations and delays.

pipeline, 53% of room supply is within the 5-star segment,

with 4-star and 3-star hotels accounting for 33% and 14% KPIs | YOY % CHANGE
respectively.
Q2 2016 is expected to witness the opening of the Centro
-7%
Shaheen which features 248 keys. -1% +0% -9% Occ 69%
OCC
MARKET PERFORMANCE
The influx of supply in 2016 is expected to put additional -5%
+6% +1% -5%
pressure on both rates and occupancies, as many projects USD 240
are materialising. A dip in corporate demand was witnessed
in Q1 due to lower oil prices, and this was accompanied by ADR Q1 Q1 Q1 Forecast
2014 2015 2016 FY 2016
lower domestic leisure demand, as more Saudis travelled to
Europe to take advantage of a weaker Euro. RevPAR
As Jeddah is a transient city for pilgrims heading to Makkah Source: STR Global, Colliers International

and Madinah, the hospitality market is also impacted by

demand to the Holy Cities. Q1 2016 saw a dip in religious WHAT TO EXPECT?
demand versus last year, and Jeddah has also been
impacted by this decrease. Maturing Recent opening of internationally
Serviced branded serviced apartment
OUTLOOK Apartment combined with forthcoming supply
Market expected to increase competition.
Continuous supply increases in the 5-star and serviced
apartment segments are expected to further increase Increasing price sensitivity along
Rate with large forthcoming supply of 5-
competition within the market. This highlights the Compression
star properties may apply downward
opportunity to develop differentiated lifestyle concepts to
pressure on 5- star rates.
remain competitive in this growing market.
Importance of As operators increase targeting of
Market fundamentals in Jeddah are expected to remain leisure, provision of space and family
families
strong despite the expected increase in competition in the orientated services will become an
short to medium term. essential requirement.

4 Saudi Arabia Q1 2016 Review | May 2016 | Hotels | Colliers International

Makkah PROJECTED HOTEL SUPPLY │NO. OF KEYS

25,890
SUPPLY
20,513
Makkah s branded hotel stock is heavily weighted towards 16,453
12,269
the 5-star segment, accounting for 86% of total supply. The 10,377
largest establishments in the market include Swissôtel
Makkah (1,488 Keys), Le Méridien Towers Makkah (1,322
Q1 2015 Q1 2016 FY 2016(f) FY 2017 (f) FY 2018 (f)
Keys), and the Pullman Zamzam Hotel Makkah (1,315 keys). Source: Colliers International
Note: The above graph covers only branded hotel supply, and takes into account potential
cancellations and delays.
Makkah hotel room supply is expected to reach 25,890
branded hotel keys by 2018 despite delays in hotel openings
seen in the past. KPIs | YOY % CHANGE
Of the total announced hotel supply until 2020, AccorHotels
holds a share of 13.4%, while Millennium Hotels & Resorts
-2%
and Hilton Worldwide represent 20.2% and 11.4% of +6% -5% -6% Occ 61%
forthcoming supply, respectively. OCC

MARKET PERFORMANCE
-8%
-3% -3% -4% USD 209
As of Q1 2016, the pilgrimage visa quotas were still in place
due to ongoing construction activity around the Haram.
Since January 2016, the market has seen a relatively large ADR Q1 Q1 Q1 Forecast
2014 2015 2016 FY 2016
drop in Iranian Umrah pilgrims. The drop in Iranian tourists
traveling to Makkah is expected to contribute to a RevPAR
downward effect on full-year performance, with
Source: STR Global, Colliers International
occupancies forecasted to be 61% and ADR at USD 209.
The larger hotels outside the central area (more than 800 WHAT TO EXPECT?
keys) were particularly affected by this decrease in
demand, and resorted to even lower room rates than usual Increased competition within the
New Projects
during low season (mostly during Safar and Shawwal). in Secondary secondary market (located 1km+
Market from Masjid) due to high land cost
OUTLOOK within proximity to the Masjid

Makkah s hospitality market is expected to truly prosper in No Change in Ongoing visa quotas due to
2017 onwards, as visa quotas are lifted and multiple Visa Quotas continued construction activity
infrastructure projects gradually come online, including the until at least Q4 2016
Haramain High Speed Railway (2017), the first phase of the
Makkah Mass Rail Transit system (2019). Lack of internationally branded
International
midscale supply, existing branded
Branding
supply continues to see improved
performance.

5 Saudi Arabia Q1 2016 Review | May 2016 | Hotels | Colliers International

Madinah PROJECTED HOTEL SUPPLY │NO. OF KEYS

SUPPLY 7,770
6,981 7,231
6,421
5,587
Al Madinah s internationally branded hotel supply is
primarily represented by 4- and 5-star hotels each of which
accounts for 14% and 86% of supply, respectively.
Q1 2015 Q1 2016 FY 2016(f) FY 2017 (f) FY 2018 (f)
In February 2016, Madinah saw the pre-opening of the
Pullman Zamzam Al Madinah hotel which would feature a Source: Colliers International
Note: The above graph covers only branded hotel supply, and takes into account potential
total of 834 keys once all inventory is released. In the next cancellations and delays.

two years, notable new hotel openings include the Ibis

Madinah Quba a in 2017 and the Grand Millennium Hotel KPIs | YOY % CHANGE
Madinah which will introduce 250 and 299 keys
respectively.
+4% +0% -8% -5%
MARKET PERFORMANCE Occ 59%
OCC
Since Madinah s branded hospitality market is equivalent to
almost half of the supply in Makkah, the level of competition
+2%
is lower. As a result, the Madinah market has been less -4% +5% +2% USD 161
impacted than Makkah by the pilgrimage visa limitations.
RevPAR is expected to dip marginally, only decreasing by ADR Q1 Q1 Q1 Forecast
2014 2015 2016 FY 2016
3% in full-year 2016. This is mainly the result of the lower
number of Iranian Umrah pilgrims. RevPAR
With the opening of the Pullman ZamZam in February 2016 Source: STR Global, Colliers International

and the Coral Madinah in Q3 2016, the market s ADR levels

are expected to benefit, however occupancy is also to be WHAT TO EXPECT?
impacted as more rooms are added to the market.

Demolition Indefinite halt of demolition in

OUTLOOK on Hold Northern Area as government
Due to Madinah s status as a religious destination, impact of funds are reprioritised.
the reduced oil price is expected to be subdued compared
Knowledge Majority of future Madinah supply to
to other markets in the Kingdom. KEC Economic be featured within KEC, however
As new supply enters the market replacing older supply City Central Area will continue to have
the strongest rates.
which is dated and of low quality Madinah s ADR is
expected to increase in the mid to long term. Resilience Due to its status as a religious
to Oil Price destination, the impact of lower
Declines oil prices is likely to be subdued.

6 Saudi Arabia Q1 2016 Review | May 2016 | Hotels | Colliers International

Khobar, Dammam & Dhahran PROJECTED HOTEL SUPPLY │NO. OF KEYS

6,989
SUPPLY
5,660
Branded hotel supply within Khobar, Dammam and Dhahran 4,507
3,649 3,739
is expected to grow at an annual rate of 16% between 2016
and 2018. Furthermore, hotel development is concentrated
within the 4- and 5-star segments, each accounting for
Q1 2015 Q1 2016 FY 2016(f) FY 2017 (f) FY 2018 (f)
36% and 48% of total forthcoming supply, respectively. Source: Colliers International
Note: The above graph covers only branded hotel supply, and takes into account potential
Notable openings in 2016 include the 218-key Al Othman cancellations and delays.

Kempinski in July 2016, and the 236-key Aloft Dhahran in

August. KPIs | YOY % CHANGE
Delays in project delivery are still expected to continue on a
similar trend to 2015 due to unstable oil prices, as well as
+2% -14%
poor project planning and budgeting in some projects. +8% -15% Occ 57%
OCC
MARKET PERFORMANCE
Both corporate demand and leisure demand are prevalent +4%
+2% -7% -6% USD 176
in the coastal cities, however these segments both saw a
dip in demand from Q3 2015 through to Q1 2016. The ADR
has been impacted in the last six months, as oil and oil- ADR Q1 Q1 Q1 Forecast
2014 2015 2016 FY 2016
related companies have engaged in cost-cutting due to the
production of lower revenues. RevPAR
Source: STR Global, Colliers International
OUTLOOK
Reduced oil prices has resulted in a strong increase of WHAT TO EXPECT?
price sensitivity, particularly from the corporate segment.
This has resulted in an increased use of third party travel Decreasing corporate demand and
Rising
agents which seek the most attractive contracts. price sensitivity will see an
Leisure
Segment increase in leisure demand for the
On a positive note, Al Khobar / Dammam is in a good market as rates are dropped.
position to further diversify its segmentation away from the
Opportunity Opportunity to develop within Half
traditional corporate market and more towards leisure and Moon Bay Area catering to families
for Resort
educational travels. One such initiative is the soon-to-open Products from Al Khobar and Dammam, as
King Abdulaziz Centre for World Culture, which is estimated well as neighbouring cities.
to have cost SAR 1.8 billion.
Price Shift of demand to more affordable
Sensitivity of accommodation options. Important
Corporate to attract demand from third party
Market travel agents.

7 Saudi Arabia Q1 2016 Review | May 2016 | Hotels | Colliers International

Colliers International Hotels
Colliers International Hotels division is a global network of specialist consultants in hotel, resort,
marina, golf, leisure an spa sectors, dedicated to providing strategic advisory services to owners,
developers and government institutions to extract best values from projects and assets. The
foundation of our service is the hands-on experience of our team combined with the intelligence
and resources of global practice. Through effective management of the hospitality process,
Colliers delivers tangible financial benefits to clients. With offices in Dubai, Abu Dhabi, Jeddah,
Riyadh and Cairo, Colliers International Hotels combines global expertise with local market
knowledge.

SERVICES AT A GLANCE

The team can advise throughout the key phases and lifecycle of projects
• Destination / Tourism / Resort / Brand Strategy
• Market and Financial Feasibility Study
• Development Consultancy & Highest and Best Use Analysis
• Operator Search, Selection and Contract Negotiation
• Pre-Opening Budget Analysis and Operational Business Plan
• Owner Representative / Asset Management / Lenders Asset Monitoring
• Site and Asset Investment Sale and Acquisition/Due Diligence
• RICS Valuations for Finance Purposes and IPOs

Our hotels team in the MENA region:

$9 39,200 8,880
billion keys Hotel keys
investment value of valued under asset management
projects advised

8 Saudi Arabia Q1 2016 Review | May 2016 | Hotels | Colliers International

 For further information,
please contact:

554 offices in Filippo Sona

Director | Head of Hotels | MENA Region

66 countries on Main +971 4 453 7400

Mobile +971 55 899 6102
filippo.sona@colliers.com

6 continents Selim El Zein

Associate Director | Hotels | MENA Region
United States: 153 Main +971 4 453 7400
Canada: 34 Mobile +971 55 899 6103
selim.elzein@colliers.com
Latin America: 24
Asia Pacific: 231 Imad Damrah
Managing Director | KSA
EMEA: 112 Main +966 11 273 7775
Mobile +966 50 417 2178
imad.damrah@colliers.com

$2.5
billion in
annual revenue
Colliers International | MENA Region
Dubai | United Arab Emirates
2
billion square feet +971 4 453 7400
under management

16,000
professionals
and staff

About Colliers International

Colliers International is a leading global real estate services company with more than 16,000 skilled
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In MENA, Colliers International has provided leading advisory services through its regional offices
located in Dubai, Abu Dhabi, Riyadh and Jeddah since 1996. The latest annual real estate survey by
Euromoney named Colliers International Best Advisor in the MENA region, UAE, Qatar and Saudi
Arabia.
Colliers International, 2016

The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to
ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their
professional advisors prior to acting on any of the material contained in this report.

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