Jeddah hotel occupancy falls amid rising supply

Rising capacity and dwindling demand saw Jeddah's hotel occupancy rate plunge in April. (Shutterstock)
Updated 11 May 2018

Jeddah hotel occupancy falls amid rising supply

  • Occupancy rate slumps 13.5% year on year in April
  • Abu Dhabi occupancy rises 2.7% despite lack of significant events

LONDON: Hotel occupancy in Jeddah fell to its lowest level in 14 years in April, with weakening demand combining with a surge in new supply.

Occupancy slumped 13.5 percent year on year to 53.5 percent last month, according to hospitality research firm STR. Demand fell 4.8 percent year on year, while the supply of hotel rooms was up 10.1 percent.

The fall in demand had a knock-on effect on revenue per available room (RevPAR) for the city’s hotels, which fell 9.4% to SR439.90 for the month, its lowest reading since 2008. The fall came despite a 4.7 percent year-on-year increase in average daily rates to SR822.06.

“Heavy investments in the region, which led to a 15.8% increase in supply for 2017, are making it difficult for hoteliers to stabilize RevPAR,” STR said in a statement yesterday.

Fellow market research firm TOPHOTELPROJECTS predicts a total of 84 hotels — comprising 27,281 rooms — will open in Saudi Arabia in 2018, with the majority opening in Riyadh, Jeddah, Makkah and Al-Khobar.

Hotels in Abu Dhabi meanwhile enjoyed higher occupancy levels last month, according to STR, despite a lack of major events in the emirate during the month to drive bookings.

Occupancy rose 2.7 percent to 80 percent in April, as demand rose 6.9 percent and supply increased 4.1 percent.

“The absolute occupancy level would be the highest for an April in the market since 2008,” the firm said.

But the ADR slipped 3.3% to 432.12 dirhams (SR,440.93), resulting in a 0.7 percent decline in revenue per RevPAR to 345.88 dirhams.

“ADR decreases have been common in the market with supply growth a factor in that trend,” STR said.

Abu Dhabi is targeting to attract 8.5 million tourists a year by 2021 and has been ramping up efforts to promote the emirate as a culture and heritage destination, especially with the opening of Louvre Abu Dhabi, the only regional presence of the famous French museum, in late 2016.

The emirate expects to welcome 5.5 million hotel guests this year, up from about 5 million in 2017.

Pakistan rupee set to come under more pressure

Updated 55 min 12 sec ago

Pakistan rupee set to come under more pressure

  • Exchange companies are required to maintain record of all buy and sell transactions equivalent to $500
  • Dollar supply declines from $3m per day to only $1m as buyer and seller decline to share identification data

KARACHI: The Pakistan rupee could face further pressure this week, in the midst of the country’s chronic foreign currency shortage and speculation of a third currency devaluation, analysts said.
The currency, which has been exposed to rising external financing requirements and lower remittances, touched 119.05 rupees to the dollar on Friday, closing at 118.70 rupees to the dollar on Saturday in the open market.
“People think that in coming days the rupee would be further under pressure due to increasing demand for the dollar so they start buying anticipating a dollar shortage,” Zeeshan Afzal, executive director-research at Insight Securities, told Arab News.
“Perception and real need (demand) drives the currency exchange market in both ways,” he said.
The rupee has been impacted by Pakistan’s historic high current account deficit of $14 billion that has widened because of increasing imports, insufficient exports and workers’ remittances.
“In Ramadan, the inflow of remittances has declined, demand for dollar from those going for Umrah has increased,” Muzamil Aslam, senior economist and CEO of EFG-Hermes Pakistan told Arab News.
Ratings agency Moody’s Investors Service last week forecast that the rupee could weaken to 125 to the dollar by June of next year.
The country’s central bank has already let the currency decline by 10 percent against the dollar in the past six months via devaluations in December and March.
Demand for dollars usually comes from general public, investors and importers, said Afzal.
“As our imports are more than our exports and other foreign exchange inflows, the pressure on US dollar (reserves) keeps mounting,” he said.


Pakistan is also taking steps against money laundering as part of its international commitment to combat terror financing, ahead of a meeting of the Financial Action Task Force meeting in June, when Pakistan will be greylisted.
As part of the measures, State Bank of Pakistan recently directed currency exchange companies to maintain records of identification documents of customers for all foreign currency transactions worth $500 or more, in line with similar thresholds in other international jurisdictions.
“The move of State Bank of Pakistan is aimed at documenting the transactions in order to discourage terror financing,” said Afzal, who added that such requirements had little impact on exchange rates.
But foreign exchange dealers have claimed that lowering the transaction threshold for identification requirements from $2,500 to $500 has negatively impacted business.
“Our daily surplus supply of dollar was around $3 million per day until a week ago, when the central bank’s measures were not enforced,”,Malik Bostan, president of the Forex Association of Pakistan, told Arab News.
“Now the supply is now down to only $1 million per day as currency exchange business has shifted to unregistered dealers.”
“There are around 30,000 unlicensed currency dealers all over Pakistan,” he claimed, adding that the majority of buyers and sellers do not want to share their identification and choose to go to unregistered dealers.
“We have asked the central bank to come up with necessary laws to protect registered currency dealers,” Bostan said. 
“Despite facing adverse business situation we have assured our support to central bank to take whatever steps are needed to get the Pakistan off the grey list of FATF.”
He said that the pressure on the dollar was unusual in the month of Ramadan when dollar inflows typically rise.


Pakistan's current account deficit has reached a historic high of about $14 billion.