Saudi boom from pilgrims, leisure and business visitors

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The view from the Edge of the World north of Riyadh, Saudi Arabia, part of the Tuwaiq escarpment. (Shutterstock)
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Coral reef in the Red Sea, Saudi Arabia. (Shutterstock)
Updated 10 July 2019
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Saudi boom from pilgrims, leisure and business visitors

  • Travelers from US, UAE and UK top list for travel demand into the Kingdom in 2018, Expedia says

LONDON: Saudi hotels are expected to benefit from an upswing in tourism, driven by pilgrims as well as leisure and business visitors, according to bookings website Expedia.

Travelers from the US, UAE and UK topped the list for travel demand into the Kingdom in 2018, the company said. The US saw more than 110 percent year-on-year growth in demand compared to the same period in 2017 with almost 45 percent share of total room nights, while UAE visitors grew 140 percent accounting for almost a fifth of total room nights.

The data also revealed strong growth in package demand from travelers in India and Spain, both growing 200 percent on a year earlier. “Major hotel groups are driving construction trends across the country as they aim to meet the demands of an ever-increasing number of domestic tourists and international visitors,” said Paula de Keijzer, a regional senior director of market management at Expedia Group.

Saudi Arabia plans to open up its tourism sector to international tourists as part of its economic reform agenda, which also includes major investments in new resorts along the Red Sea coastline such as the 30,000 square km NEOM mega project.

Real estate consultancy Colliers expects international arrivals to Saudi Arabia to increase by about 5.6 percent annually from 17.7 million in 2018 to 23.3 million in 2023.The growth is expected to be driven by religious tourism, with the aim of extending pilgrim visits. The Kingdom aims to attract 30 million pilgrims by 2030, an increase of 11 million from the 19 million Hajj and Umrah pilgrims in 2017.

Despite expectations for rising visitor numbers, hotels remain under short-term pressure as new room supply awaits expected future demand. 

More than 5,000 keys are forecast to be delivered to the market by 2022, according to CBRE’s market snapshot as more international chains open properties.

Among the most recent arrivals is China’s Oyo Hotels & Homes, which has struck an initial agreement with the Kingdom’s Public Investment Fund to open 50 hotels across seven cities.

It is also establishing two training schools in Riyadh and Jeddah to train Saudi graduates in hotel management.


China central bank moves to support financial institutions

Chinese 100 yuan banknotes are seen on a counter of a branch of a commercial bank in Beijing, China, March 30, 2016. (REUTERS)
Updated 24 July 2019
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China central bank moves to support financial institutions

  • Many market watchers believe the PBOC will adjust its money market rates in early August if the US Federal Reserve cuts its key rate, as widely expected, on July 31

BEIJING: China’s central bank offered medium-term loans to financial institutions on Tuesday in an attempt to get more affordable funds to struggling smaller firms, as it steps up efforts to support a slowing economy.
With growth in China sliding to a near 30-year low, global financial markets are closely watching to see if the People’s Bank
of China (PBOC) will trim interest rates soon in line with expected easing by other central banks.
While the PBOC left rates on the medium-term loans unchanged on Tuesday, and the injection had been expected, it funneled more lower-cost funds into a credit program aimed specifically at reducing strains on small and medium-sized businesses.
The PBOC lent 497.7 billion yuan ($72.31 billion), including 200 billion yuan through one-year medium-term lending facility (MLF) loans and another 297.7 billion yuan through targeted medium-term lending facility (TMLF) loans, it said in a statement.
The size of the TMLF funding was 11 percent larger than the last such injection in April.
Interest rates for both liquidity facilities were unchanged from previous levels. The one-year MLF and TMLF remained at 3.30 percent and 3.15 percent, respectively.
The total amount roughly offset 502 billion yuan of MLF loans that were set to expire on Tuesday,
ensuring a steady supply of cash.
“Replacing some MLF with TMLF effectively cut funding costs. We should focus on the lower rate, instead of the net drainage on the day,” said Frances Cheung, head of Asia macro strategy at Westpac in Singapore.

BACKGROUND

China is keeping all its policy tools within reach as the trade war with the US gets longer and costlier, but sees more aggressive action like interest rate cuts as a last resort given concerns about rising debt.

The central bank said banking system liquidity will be “reasonably ample” after the lending operations.
About 160 billion yuan in reverse repos were also set to expire on Tuesday, according to Reuters calculations based on official data. The PBOC did not say in its statement whether it had drained funds from money markets on Tuesday.

BACKGROUND

China is keeping all its policy tools within reach as the trade war with the US gets longer and costlier, but sees more aggressive action like interest rate cuts as a last resort given concerns about rising debt.

Some traders said Tuesday’s moves were in line with the PBOC’s support measures since last year, which have been aimed at getting more affordable financing to small and private companies.
While Chinese regulators have urged banks to keep lending to distressed firms, such companies are often considered higher credit risks than big, state-owned enterprises.
Traders and analysts still expect the PBOC to cut rates on some of its liquidity tools in coming months.
The PBOC has already slashed banks’ reserve requirement ratios (RRR) six times since early 2018 to free up more money to lend, while guiding short-term market rates lower through liquidity injections in various forms.
Many market watchers believe the PBOC will adjust its money market rates in early August if the US Federal Reserve cuts its key rate, as widely expected, on July 31.
Cheung from Westpac said it was still possible the PBOC could lower the MLF rate after the Fed’s policy decision.
She also has pencilled in a 50 basis-point RRR cut this quarter, and another in the fourth quarter.