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
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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.


Abu Dhabi aims to lure start-ups with investment in new technology hub

Updated 24 March 2019
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Abu Dhabi aims to lure start-ups with investment in new technology hub

  • The initiative will help Abu Dhabi reduce reliance on oil
  • Mubadala hopes to attract Chinese and Indian companies

ABU DHABI: Abu Dhabi will commit up to $272 million to support technology start-ups, it said on Sunday, in a dedicated hub as part of efforts to diversify its economy.

US tech giant Microsoft will be a strategic partner, providing technology and cloud services to the businesses that join the hub as the capital of the United Arab Emirates continues its push to reduce reliance on oil revenue.
Abu Dhabi derives about 50 percent of its real gross domestic product and about 90 percent of central government revenue from the hydrocarbon sector, according to ratings agency S&P.
The emirate launched a $13.6 billion stimulus fund, Ghadan 21, in September last year to accelerate economic growth. Ghadan means tomorrow in Arabic. The new initiative, named Hub 71, is linked to Ghadan will also involve the launch of a $136 million fund to invest in start-ups, said Ibrahim Ajami, head of Mubadala Ventures, the technology arm of Mubadala Investment Co.
The goal is to have 100 companies over the next three to five years, Ajami said. “The market opportunities in this region are immense,” he added.
Mubadala, with assets of $225 billion and a big investor in tech companies, will act as the driver of the hub, located in the emirate’s financial district.
Softbank will be active in the hub and support the expansion of companies in which it has invested, Ajami said, adding that Mubadala is also aiming to attract Chinese and Indian companies, among others.
Mubadala which has committed $15 billion to the Softbank Vision Fund, plans to launch a $400 million fund to invest in leading European technology companies.
Incentives mapped out by the government include housing, office space and health insurance as part of the $272 million commitment, Ajami said.
Abu Dhabi will also announce a new research and development initiative on Monday linked to the Ghadan 21 plan, according to an invitation sent to journalists.