Luxury hotel companies are flocking to Riyadh as the Saudi capital gains increasing regional and international prominence.
Fairmont on Sunday became the latest operator to announce a new hotel in the city. That followed an announcement last week that Kingdom Holding would build a second Four Seasons property in Riyadh.
"All the big brands are hot on Riyadh," said Chiheb ben Mahmoud, the senior vice president at Jones Lang LaSalle Hotels for the Middle East and Africa.
Fairmont said it planned to open a 287-room luxury hotel and a 4,000 square metre convention centre in the city. The project is expected to open next year.
Other hotels under development in Riyadh include a Ritz-Carlton, a Kempinski and a Moevenpick. "Riyadh has been lagging," said Mr ben Mahmoud. "There has been a discrepancy for some time between its role as capital of the kingdom of Saudi and the quantity and quality of its hotels."
Foreign visitors to Riyadh are primarily business travellers. The city also receives some Saudi leisure tourists.
"Now Saudi Arabia is catching up very quickly to boost its hotel offering in line with the growing regional importance of Saudi Arabia," said Mr ben Mahmoud. "Saudi Arabia is part of G20. It has an increasing regional role and that requires a certain level of hospitality infrastructure."
But development is moving ahead at a significantly slower pace than the rapid expansion that has been seen in the UAE, he said. "They have a more prudent approach to hotel investments. It is slow, but the amount of interest is high."
The Fairmont Riyadh is part of a mixed-use development called Business Gate.
Saudi Arabia also has significant interests in some of the hotel companies expanding in the country.
Fairmont is owned by Fairmont Raffles, in which Prince Alwaleed bin Talal bin Abdulaziz Al Saud's Kingdom Holding has a 35 per cent stake.
Kingdom Holding also has a substantial stake in Moevenpick Hotels and Resorts, and a 47.5 per cent stake in Four Seasons.
Average occupancy levels last year in Riyadh fell to below 60 per cent and average rates declined, leading to an almost 11 per cent drop in revenue per available room, according to a report by Jones Lang LaSalle.
The consultancy said this was a reflection of the global economic slowdown. But it added that the luxury hotel market had outperformed the market, citing "strong demand" for five-star accommodation.
"The five-star market remained relatively stable over the first half of 2010, however the third quarter experienced the normal seasonal decline in performance associated with Ramadan and the summer holiday period," the report stated.