Synchronised for Success - Dur Hospitality
A blueprint for sustainable growth- Delivering the expectations set out in Saudi Arabia’s Vision 2030 will hinge on innovative hospitality concepts, flexible business models and solid owner-operator partnerships
In the lead up to the 2019 Arabian Hotel Investment Conference (AHIC), we asked a number of industry partners how they synchronise for success.
The GCC's hospitality industry is undergoing an unprecedented period of change. As governments across the region forge ahead with economic diversification strategies, ploughing significant investment into huge infrastructure developments and non-oil sectors of the economy, so opportunities to introduce new hospitality concepts arise.
Against this backdrop, the spotlight shines on Saudi Arabia, the Gulf's economic powerhouse and largest country. The Kingdom is undergoing extraordinary socio-economic development, in line with its transformative Vision 2030 strategy, and the potential impact on the country's hospitality sector is nothing short of phenomenal. More than US$3.9 billion-worth of hospitalitycontracts are set to be awarded in Saudi Arabia over the next five years, according to MEED Projects, while available guestroom inventory will double between now and 2024, with some 273 properties pipelined delivering 90,449 rooms, STR has revealed (1).
With international arrivals to Saudi Arabia on track to grow from 17.68 million in 2018 to 29.96 million by 2028 (2) and Vision 2030 setting the goal of 30 million Umrah visitors, the opportunities to develop a multitude of accommodation offerings in destinations across the country are endless. However, stakeholder synchronisation is required on many levels. Firstly, investors, owners and operators must align their strategies to Vision 2030 goals, developing projects and hospitality concepts that meet its wide-ranging requirements. This requires identifying opportunities for local and international brands, short- and extended-stay concepts, and innovative accommodation solutions that cater to the needs and budgets of an increasingly diverse traveller mix. Religious, leisure and business travellers, plus families, corporate groups and expats, will all flood the market in the years to come.
Local hospitality brands are in a strong position to capitalise on Saudi Arabia's rapid tourism industry growth. They provide authentic Saudi hospitality and thanks to their local market insight, can offer unique concepts that target specific groups such as religious tourists, for example, who require specialised services such as spiritual guidance. At the same time, with more international travellers visiting Saudi than ever before, particularly with relaxed visa regulations coming into force, recognised global hotel operators have a major role to play. Visitors will seek international brands they can trust and will be lured by their renowned loyalty programmes and consistent brand signatures. At the same time, they will demand a mix of hotels and fully-serviced residences that meet their expectations and world-class standards.
Savvy owners and operators will also tap into the growing need for serviced apartments as the number of long-stay guests, as well as corporate groups and families visiting Saudi Arabia, continues to boom. Serviced apartments also cater to the fast-growing midmarket segment, with analysts at Colliers revealing this sector will experience a compound annual growth rate (CAGR) of 16% between 2017 and 2021 (3). There's also the growth of the MICE market to consider, with Saudi outlining its ambitions to become a regional business events hub as part of Vision 2030, fuelling the growth of the extended-stay and serviced apartments market significantly.
Once owners, investors and operators have aligned their strategies to Vision 2030, they must come together to develop the best business and investment models for success, with a range of options from which to choose - ownership, management, leasing, franchising, joint ventures and profit-sharing, to name a few. The type of investment and business model required will depend on the nature of the project and stakeholder relationships, but the synchronisation of all parties involved, ideally through solid, long-term partnerships that create a win-win situation for all, will be crucial for success.
As competition intensifies and more disruptors make their presence felt - a scenario that will develop as the Saudi market matures and demand accelerates - owners and operators must come together to embrace flexibility, adaptability and innovation in terms of business models and hospitality concepts. Together, partners must continually analyse the market opportunities available, stay on top of - and forecast - guest and industry trends, and strive to introduce accommodation models that deliver on the expectations of modern guests.
Catering to the traveller of the future is key in any market, but it is absolutely essential in Saudi Arabia where the pace of change is so fervently rapid. Working in partnership with like-minded owners and investors to pioneer innovative hospitality concepts, while simultaneously harmonising corporate and commercial goals, is essential in this dynamic environment. It is an exciting juggling act where synchronisation skills will constantly be put to the test.