Four-star hotels to dominate Makkah's hospitality sector by 2021

Four-star hotels will dominate Makkah's hospitality sector in the next three years, as the government is expected to relax visa quotas and increase tourist flows sharply in short to medium term, global consultancy Knight Frank said in a recent report.

The hospitality market in Makkah is dominated by locally-branded supply in secondary locations, with 50 percent of the total room supply classified as two-star or below, which highlights the need for quality hospitality accommodation.

"The pipeline of quality hotels is dominated by four-star properties, which account for 55 percent of the forthcoming 21,806 quality keys by 2021," the report noted.

While revenue per available room (RevPAR) levels continued to decline in the first nine months of 2018, falling by 9.6 percent compared to the previous year, Knight Frank expects market-wide performance to face continued pressure in the short-term, although hotels in primary locations will prove to be more resilient.

In order to facilitate religious tourist inflows, the Saudi government has announced plans to upgrade the existing infrastructure. The opening of the Haramain High-Speed Railway and significant progress with the enhancement works at King Abdulaziz International Airport are strong signals that the infrastructure is catching up to governmental ambitions for the city.

“As large infrastructure projects reach completion, the traditional demand-side bottlenecks related to capacity constraints will be alleviated allowing for increased visitation and revenue inflows, which will ultimately uplift hotel values in the medium to long-term,” said Ali Manzoor, Partner Hospitality & Leisure at Knight Frank.