Hospitality market: Jeddah ‘boasts strong resilience’

Updated 09 February 2016
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Hospitality market: Jeddah ‘boasts strong resilience’

JEDDAH: Jeddah’s hospitality market is expected to witness the entry of more than 5,333 hotel keys between 2016 and 2018, primarily represented by 5- and 4-star properties, each accounting for 51 percent and 31 percent of total forthcoming supply, respectively.

These predictions are made in a report released by Colliers International, a leader in real estate services industry.
It said that the fourth quarter of 2015 witnessed the opening of three internationally branded serviced apartments, all of which are operated by The Ascott Ltd., namely the Ascott Tahlia (125 keys), the Ascott Sari (52 keys), and the Citadines Al-Salamah (136 keys).
Jeddah has seen a large delay in hotel openings during 2015, with close to 30 percent of forthcoming supply being delayed for one year, and 25 percent being delayed for two. This trend in delays is expected to continue over the next 5 years.
Jeddah’s hospitality market witnessed growth in average rates between 2013 and 2014 as a result of the supply remaining fairly stable. However, 2015 witnessed a slight decline in average rates and occupancy as a result of the return of tourism flows to the Egyptian destinations combined with new hospitality supply in Jeddah (including serviced apartments).
Jeddah boasts strong resilience to seasonality fluctuations due to the diverse market segments it caters to. This relative stability supports a stable and healthy occupancy performance throughout the year, according to the report.
New hotels in Riyadh that can differentiate themselves through more innovative and exciting design or services concepts are expected to see better occupancy performance versus competing hotels, said Colliers International.
As the decline of the oil price continues, corporate demand in the overall market in Riyadh is expected to see continued slow growth in the short term. As a result, hoteliers are expected to continue targeting the domestic family market by providing new differentiated products catering to their needs and preferences, states the Colliers report titled “Quarterly Report — Saudi Arabia | Hotels Q4 2015.
Branded hotel supply in Riyadh is expected to grow at an average annual rate of 28 percent, with 4-and 5-star room stock accounting for 50 percent and 46 percent of supply, respectively. While this forecasted growth rate appears considerably high, it is likely to be affected by further delays, Colliers said.
Corporate demand growth slowed in the second half of 2015. This trend is expected to continue through to 2016 due to slowing economic activity countrywide, said the report.
Older hotels in the market will potentially face difficulties in maintaining their historically high rates as new, more modern properties enter the market, it added.
Branded hotel supply within Alkhobar, Dammam and Dhahran is expected to grow at an annual rate of 16 percent between 2016 and 2018. Furthermore, hotel development is concentrated within the 4- and 5-star segments, each accounting for 45 percent and 37 percent of total forthcoming supply.
Delays in project delivery are still expected, following the trend during 2015 where 36 percent of forthcoming supply had been delayed for one year, and 38 percent had been delayed from previous years.
Hotel markets in AlKhobar and Dammam cater to both corporate and leisure demand, and have seen favorable performance between 2013 and 2014. However, 2015 witnessed a stronger decline in average rates, attributed to the lower corporate demand from oil companies in AlKhobar, as well the decline in the euro which encouraged Saudi leisure tourists to travel abroad, stated the report.
As a result of declining oil prices, demand for accommodation from the corporate segment  which is the market s primary demand source  has shifted from 5- to 4-star properties, in effort to reduce costs, forcing 5-star establishment to reduce their prices to remain competitive within the market.
If oil prices continue to decline, it is expected that demand for hospitality accommodation will shift toward establishments with more affordable room rates.
The report also said that Makkah is expected to reach 25,519 branded hotel keys by 2018 despite delays in hotel openings seen in the past. The expected supply in 2018 is more than double that seen in 2015. Of the total forthcoming hotel supply until 2020, Millennium Hotels & Resorts and Hilton Worldwide represent 22 percent and 12 percent, respectively.


Oil slips to around $63 as Iran concerns fade for now

Updated 18 min 29 sec ago
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Oil slips to around $63 as Iran concerns fade for now

  • US crude inventories expected to fall for 6th week
  • Goldman cuts 2019 oil demand forecast

LONDON: Oil slipped to around $63 a barrel on Tuesday as concerns faded for now that rising tensions in the Middle East would escalate and hit oil supplies, compounding the impact of a weaker demand outlook.
Iran’s capture of a British oil tanker last week sparked worries about supply disruptions in the Strait of Hormuz, through which about a fifth of the world’s oil flows, prompting crude to rally on Monday.
But oil prices have since pared some gains. Brent crude fell 31 cents to $62.95 a barrel by 1227 GMT on Tuesday. US West Texas Intermediate crude slipped 23 cents to $55.99.
“The response of oil prices to the seizure of a British oil tanker by armed Iranian forces near the Strait of Hormuz has been amazingly muted so far,” said Carsten Fritsch, analyst at Commerzbank.
“It appears that the majority of market participants are convinced that there will be no open conflict between the West and Iran,” he said.
The tensions come as the United States aims to cut off Iran’s oil exports and against the backdrop of supply cuts led by the Organization of the Petroleum Exporting Countries since the start of the year to prop up prices.
As part of US efforts, Washington has imposed sanctions on Chinese state-run energy company Zhuhai Zhenrong Co. Ltd. for allegedly violating restrictions imposed on Iran’s oil sector.
Despite lower Iranian exports and OPEC’s voluntary supply curbs, oil supply is exceeding demand due to strong growth in output from the United States and other non-OPEC producers, according to the International Energy Agency.
A weaker outlook for oil demand because of slowing economic growth has weighed on prices, which are still up by 18% in 2019 helped by the OPEC-led supply pact.
“Although prices had been driven by supply developments in the first half of the year economic considerations are making oil bulls careful this month,” said Tamas Varga of oil broker PVM.
Goldman Sachs lowered its 2019 oil demand projection on Sunday, joining other forecasters such as the IEA and OPEC in trimming its outlook for fuel use.
Oil may gain further support from expectations of another drop in US crude inventories in weekly reports due later on Tuesday and on Wednesday. Analysts expect a 3.4 million-barrel drop in crude stocks.
The American Petroleum Institute, an industry group, releases its inventory report at 2030 GMT.