Saudi Arabia to see sharp increase in luxury hotels

Visitors are seen at the 71st floor of the Gevora Hotel, the world's tallest hotel, in Dubai. The emirate remains the dominant regional market for luxury hotels, but Saudi Arabia is catching up, according to hospitality analysts. (Reuters)
Updated 27 February 2018

Saudi Arabia to see sharp increase in luxury hotels

LONDON: Saudi Arabia is expected to see a “significant” increase in the number of luxury hotels in the kingdom by 2022, potentially threatening the dominance of the UAE in the high-end market, according to a new report.
The supply of luxury hotels in Saudi Arabia is anticipated to increase annually at 18 percent (compound annual growth rate) from 2018, far exceeding the 10 percent growth rate expected in the UAE, according to research published by real estate advisory firm Colliers International.
Luxury hotel supply in both Oman and Kuwait is due to grow by 11 percent, while Bahrain will see 9 percent growth.
The report also suggests that the luxury sector in Saudi Arabia is also more resilient than the country’s overall hotel market.
Last year, the luxury hotel market in Riyadh saw a 9 percent growth in the revenue per available room measure (RevPar), despite the overall market declining, the report said.
Saudi Arabia recorded a 5.2 percent decline in overall hotel occupancy in 2017, with a 4.4 percent drop in average daily rate (ADR), and a 9.3 percent decline in RevPar compared to the previous year, according to data provider STR Global.
Craig Plumb, head of research, Mena at JLL, told Arab News there were other factors that would also help the growth of Saudi Arabia’s hotel sector, potentially helping it catch up with the UAE.
“Recent announcements of major investment in the tourism sector, along with the relaxation of visa requirements to permit tourist visas for more nationalities, are expected to have a major positive impact on the hotel market within Saudi Arabia,” he said.
“While these changes will have only a partial impact on market conditions in 2018, there is little doubt that the Saudi market will close some of the gap with the UAE over the medium to long term,” he said.
Taimur Khan, senior analyst at Knight Frank, also noted efforts underway to encourage more tourism and hotel visitors.
“In Saudi Arabia there is positive sentiment for the medium to long-term due to various initiatives being put in place as part of Vision 2030 and the NTP which look to present the Kingdom as a more leisure-friendly destination,” he told Arab News, before noting that the country still struggles with only a limited pool of potential visitors.
“In Saudi Arabia the demand pools are limited to business tourism and religious tourism, this is one of the main challenges. However, there are strategies which have been devised to diversify target segments such as easing of visa restrictions,” he said.
The UAE currently leads the GCC luxury hospitality sector, with 73 percent of existing luxury hotel stock in the region and 61 percent of the region’s current luxury pipeline.
Within the UAE, 35 percent of last year’s pipeline for hotels consisted of luxury projects, with most concentrated in Dubai. This compares to luxury developments accounting for only 14 percent of projects in Saudi Arabia, 20 percent in Kuwait, 19 percent in Bahrain and 11 percent in Oman.
There are also signs that the budget to mid-market hotel sector is expanding in the UAE.
“While the market remains dominated by the luxury sector, an increasing number of budget and mid market brands are scheduled to enter the market over the next two years,” said Plumb.
“The addition of more mid-market projects is expected to act as a drag on the average performance of the UAE market, with ADR and RevPar expected to decline from current levels over the next two years,” he said.


OPEC and its allies meet to discuss oil output cuts

Updated 06 June 2020

OPEC and its allies meet to discuss oil output cuts

  • The meeting, originally scheduled for next week, was brought forward to Saturday

VIENNA: OPEC and its allies were holding talks via video conference Saturday to assess their current deal to slash production as oil prices tentatively recover on easing coronavirus lockdowns.
The 13-member group and other oil producing nations such as Russia and Mexico are discussing an agreement reached in April to boost prices, which have plummeted over falling demand as countries around the world have imposed strict lockdowns to stop the spread of the new coronavirus.
The meeting, originally scheduled for next week, was brought forward to Saturday at the suggestion of Algerian Oil Minister Mohamed Arkab, who currently holds the rotating presidency of the Organization of Petroleum Exporting Countries.
Under the terms of the April agreement, OPEC and the so-called OPEC+ pledged to cut output by 9.7 million barrels per day (bpd) from May 1 until the end of June.
The reductions would then be gradually relaxed from July, with 7.7 million bpd taken off the market from July to December.
But at Saturday’s talks, crude producers were expected to discuss extending the 9.7 million bpd beyond June, even if agreement might prove difficult to reach.
The April deal was signed after days of wrangling between major players, whose revenues have been ravaged by the collapsing oil market this year.
“It seems very likely the May-June cuts will be extended by another month,” said Bjornar Tonhaugen, analyst at Rystad Energy.
Some market observers are expecting the cuts to be extended still further, possibly until the end of the summer or even until the end of the year.
Although more countries around the world are gradually moving out of lockdown, crude consumption has not returned to pre-confinement levels, which had already been comparatively low.
As in previous negotiations, discussions could prove particularly tense between Russia and Saudi Arabia, the deal’s two heavyweights who became involved in a short but bitter price war when previous talks broke down in March.
Mexico, which held up the April deal before it was eventually finalized, has also already ruled out any further drop in oil production with its president, Andres Manuel Lopez Obrador, saying on Friday his country “could not adjust our production further.”
Another major bone of contention could be the willingness of each country to abide by the agreed production quotas, suggested RBC analyst Al Stanton.
According to data intelligence company Kpler, OPEC+ reduced output by around 8.6 million bpd in May, a smaller cut than planned, with Iraq and Nigeria seen as the main culprits.
Nigeria’s Ministry of Petroleum Resources said in a tweet Saturday that it backed discussions to allow countries which failed to conform fully to the agreed cuts in May and June to make up for it in July, August and September
Despite the difficulties, the output cuts have helped support oil prices, which rose to around $40 per barrel at the start of June for both the US benchmark, West Texas Intermediate (WTI), and Europe’s Brent North Sea contracts.
Around April 20, both had slumped to historic lows, with Brent falling as low as $15 and WTI even entering negative territory.