Case Study – Long Term Study
Description
The client wanted to analyze the current scenario of luxury resorts post Covid-19 in Saudi and determine if it suitable to setup a new hotel in the market.
Duration
65-70 hours of research
Impact
The study showed that the pandemic proved to be a boon for the luxury hotel industry and provided the client with recommendation on the right time and strategies to open a new hotel
Research on Saudi Luxury Hotel Industry
Table of Contents
1. Project Background
2. Executive Summary
3. Economy of Saudi Arabia
4. Luxury Hotel Market Overview: Size and Growth
5. Luxury Hotel Market Overview: Growth Drivers in Saudi Arabia
6. Luxury Hotel Market Overview: Overall Opportunities and Challenges
7. The Impact of COVID -19 – Challenges imposed by COVID Advantages in COVID- 19
8. Luxury Hotel Market Overview: Regional Analysis
9. Luxury Hotel Market Overview: Customer Analysis
10. Luxury Hotel Market Overview: Growing of Beach Resort in Saudi Arabia
11. Luxury Hotel Market Overview: Porter Analysis
12. Major Players
13. Competitive Analysis: Company Profile
14. Competitive Analysis: Franchise Profile
Project Background
The client aims to run a beach based resort in Jeddah, Saudi Arabia and would like to conduct a business research to assess the rising competition among 5 STAR brands, understand the future projects in the field as part of the Kingdom’s “Vision 2030”, and to improve the overall product and services in the
country.
Executive Summary
- Saudi Arabia is the largest economy in the Middle East, with that historically being driven by oil. However, in the last few years the Government has been focusing on the development of non-oil sectors to achieve its Vision 2030. Saudi’s Vision of 2030 is taking initiatives to grow the Hotel industry at pace so that it can contribute up to 10% of annual GDP by 2030.
- Saudi Government is trying to attract major investment in the tourism sector so as to cope up with the situation of pandemic and thus major brands are building their hotels in the city.
- The Luxury Hotel Industry is one of the growing sectors in Saudi as international and national visitors are moving ahead with luxury stays and due to this luxury resorts are expanding. The market was even growing in the COVID period. Saudi is considered as 1st in GCC and 6th Country in the world as the safest place to visit during COVID
- Saudi has many international and national hotel chains along with the growing tourism demand in the country, significant demand for leisure, corporate and religious visitors. Inclination of travelers toward peaceful areas than crowded places has increased the demand for beach hotels. COVID situation could not impact much as most of the visitors are Nationals of Saudi and post lockdown they started travelling for a change and almost 60% rooms were occupied on weekdays and 90% to 95% were occupied on weekends.
- A huge number of visitors also visit Saudi for its culture and the most famous culture is the religious activities which take place. On the other hand, Hajj and Umrah Visitors are another growth factor for Luxury Hotel Industry since they were there in the past 100 years and also will be there for the next 100 years.
- Saudi also has increased its hotel offering in recent years with growing interest from international hotel groups. The capital city, Riyadh is the country’s fastest-growing city in terms of new hotels, with 44 projects and 10,602 rooms in the pipeline. While cities such as Jeddah, Makkah (Mecca) and Madinah (Medina) continue to lead the way, considerably increasing their hospitality offering.
- Beach Resorts in Saudi are growing significantly as tourists get a combination of Sea – Sun, & Sand and shopping. Saudi people are good spenders and they like to travel and also take staycations. On the other hand, due to the COVID situation, Saudi went under lockdown and people were depressed. Thus when people came out from the lockdown, they preferred to get some change of mind and many of them selected beach destinations.
The Economy of Saudi Arabia
Saudi Arabia is the largest oil dependent economy in the Middle East. There are strong government controls over major economic activities. However, Saudi
Arabia has encouraged the growth of the private sector in order to diversify its economy and to employ its own nationals, with officials being especially focused on employing its large youth population. Approximately 6 million foreign workers play an important role in the Saudi economy, particularly in the oil and service sectors.
According to IMF, due to the outbreak of the COVID-19, GDP growth is expected to fall to 2.3% in 2020 and then rise again to 2.9% in 2021 (subject to the postpandemic global economic recovery). The public debt is estimated to grow to 28.4% in 2020 and further increase to 33.6% by 2021.
Source: Nordea Trade, Focus-Economics, The Odora, Heritage, Trading Economics
- Luxury resorts in construction are expected to widen choice for both
domestic and international visitors. Also, the rooms in construction are
set to increase current stock levels by 51.4%, delivering over 48,000 new
rooms - Main drivers of the market are rapid economic growth, the development
of real estate projects investment, and new constructions. - In 2023, the Saudi Arabian hotels & motels industry is forecasted to have a
volume of 2,944.5 establishments, an increase of 41.4% since 2018 - Saudi’s Vision of 2030 is taking initiatives to grow the Hotel industry at pace so that it can contribute up to 10% of annual GDP by 2030, up from the current 3%
Luxury Hotel Market Overview: Overall Opportunities and Challenges
The Impact of COVID-19
Financial Loss
Due to COVID 19, the Luxury Industry sector’s financial loss is expected to reach between USD 50 Bn and USD 60 Bn dollars, including USD 10 Bn to USD 15 Bn in the hotel sector in the GCC region.
Growth of Tourism and Travel Sector
The growth in the tourism and travel sector in the Gulf region was about 10% during the past five years, and on this basis the expectations were that the entire spending on travel and tourism in the Gulf region would have reached USD 110 Bn in 2020.
Impact of the Pandemic
The continued impact of the COVID-19 pandemic has led to market wide drops in performance, however, the Kingdom of Saudi Arabia is expected to benefit from its large domestic market and initiatives such as Summer Seasons, on its road to recovery.
Challenges imposed by COVID
Advantages in COVID-19
Luxury Hotel Market Overview: Regional Analysis
Luxury Hotel Market Overview: Regional Analysis
Riyadh
• The market is expected to witness a strong pipeline of new supply over the next three years.
• Riyadh is the country’s fastest-growing city in terms of new hotels
• The market within Riyadh was observed to be highly competitive
in terms of their offerings and the prices they offer.
• Corporate demand remained the key driver of demand,
contributing 29.9% of total room nights
Jeddah
• Jeddah hotel market has consistently achieved strong performance levels in the past, driven by the limited supply of quality hotels and stable year-round demand.
• Room revenue softened significantly in 2018, the market was able to maintain healthy department profits at 86.4 %, which are some of the highest in the region.
• The reduction in average rate was driven by a 13.3 percent decline in BAR rates as well as a 5.5 percent decline in leisure rates in terms of their offerings and the prices they offer.
• Corporate demand remained the key driver of demand, contributing 29.9% of total room nights
Al Khobar
- The Al Khobar hotel market experienced mixed performance in 2018,
however overall, hotels ended the year with positive growth in RevPAR and
notably higher profitability.
• The market-wide occupancies increased 7.8 percentage points in 2018, from 55.1% to 62.9%
Makkah
• Makkah’s four and five-star hotel market saw a 0.8% point decline in
occupancy to 69.3%, on the back of weaker corporate and government demand
• Hotel demand in Makkah is driven by religious tourism which attracted over
8.5 million foreign pilgrims
• Supply growth in 2018 has been relatively limited.
Madinah
• Due to the religious nature of hotel demand in Madinah, hotel performance
levels appear to be strongly correlated with those observed in Makkah
• Religious tourism accounts for almost all of the hotel demand in the city’s
central area, dominated by domestic demand and regional GCC demand
Luxury Hotel Market Overview: Customer Analysis
Luxury Hotel Market Overview: Growing of Beach Resort in Saudi Arabia
Luxury Hotel Market Overview: Porter Analysis
