Hilton Worldwide plans to open nearly 7,000 hotel rooms in Saudi Arabia in the next two years, as operators focus on the kingdom amid continued difficult financing conditions in many other parts of the region and globally.
Hilton, which already manages six hotels in Saudi Arabia, announced at the Arabian Hotel Investment Conference, which ends today in Dubai, that it intended to open 14 additional hotels in the kingdom, in cities including Mecca and Riyadh, over the next two years.
The move would make it the fastest-growing hotel company in the country.
Other major hotel operators, including InterContinental Hotels Group, Starwood and Jumeirah, have identified the kingdom as an important market for expansion, with greater promotion of domestic travel there, a shortage of hotels for corporate needs and a large flow of religious tourists to the country.
"Definitely there is a market in Saudi Arabia," said Gabriel Matar, the head of hotels at Jones Lang LaSalle Hotels for the Middle East and Africa. "There is a market for outgoing capital and there is a market for projects financed by Saudi money in Saudi Arabia.
"The Saudi money is abundant with the oil price now. In Saudi Arabia, there are huge expectations about internal tourism, which needs infrastructure."
Financing conditions for the hotel sector are still difficult globally, Mr Matar said.
"Of course we are into a major financial crisis and it's not over. Banks are suffering. They are not into a lending mood in general."
Mr Matar said the hotel shortage in Saudi Arabia translated into good returns on investment for developers.
Hilton aims to hire 23,000 employees in the Middle East and Africa for the properties it is planning, with most of these in the GCC.
"The other reason why Saudi is important is because of the outbound opportunities," said Rudi Jagersbacher, the president of Hilton Worldwide, Middle East and Africa. "One of our responsibilities is also to make sure that we develop in areas that can also potentially have outbound business."
Hilton also aims to recruit 40 per cent of employees for its Saudi hotels from within the country.
"We have lined up agreements with hotel schools in Saudi Arabia," said Mr Jagersbacher. "We have recruited specific people just to deal with this in these particular markets."
There are plans to expand even further in the kingdom, he said. "We are signing more deals as we go along."
The company's expansion strategy represents more than 17 per cent of the entire hotel pipeline and about 26 per cent of the rooms to be developed across the kingdom, Hilton said. It also makes up more than one third of Hilton's hotels planned for the Middle East and Africa.
"It is a strong market," said Jan Smits, the chief executive of InterContinental Hotels Group, Asia, Middle East and Africa. "It has strong GDP growth, strong revpar [revenue per available room] growth. The infrastructure investment that is going into Saudi Arabia at the moment is phenomenal.
"GDP drives growth in our industry too," Mr Smits said.
InterContinental operates 22 hotels in the kingdom and has nine under development, hesaid.
"Saudi Arabia is key for us," said Neil George, Starwood's vice president of acquisitions and development in Africa and the Middle East. "We have 10 hotels there now, and we'll be up to 15 in the next three years. This year we'll open a Sheraton and a Four Points by Sheraton in Medina. Most of the growth in Saudi Arabia will come on two fronts - we'll have the luxury end of the market, so we'll look to take St Regis brand there and our upper-end brands, and at the same time we'll look to grow our portfolio Alofts and Four Points by Sheraton across the country, secondary cities."
Hotel transaction volumes in the investment market in Europe, the Middle East and Africa are expected to remain flat at $11 billion (Dh40.4bn) this year, according to Jones Lang LaSalle Hotels.
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