Pilgrims pay up to 25% more for accommodation after 1,000 properties were demolished to expand the Makkah Grand Mosque.
Mecca faces rooms shortage
"The matter is simple, its all about supply and demand and since many of the hotels overlooking the Grand Mosque got knocked down three months ago, the ones still here can increase their price," said Mohamed Youssef, the director of sales at the Makkah Hilton & Towers which overlooks the holy site. He added that the average price increase of hotels in the area was in the range of 20 to 25 per cent, while the Hilton only hiked their prices by 10 per cent to reach an average of 2,200 riyals (Dh2,600) on weekdays and 2,666 riyals on weekdays.
"Every year there is a slight increase in prices but this year its a little bit more because there are fewer hotels," said Mr Youssef.
Samy al Zahran, the assistant sales manager at Intercontinental Dar Al Tawhid in Makkah, said that the hotel only increased its prices by three per cent from last year.
"There are lots of rumours in the market that hotels in this area have increased their prices by 60 per cent but this is not true," said Mr Zahran. The hotel currently has an average room rate of 9,537 Riyals. "We are a five-star hotel and this is peak season for us that's why the room rates are high," he added.
Noha Abdallah, a sales officer at Al Tayyar Travel, one of Saudi Arabia's largest tour operators, believes that some hotels are exploiting the situation.
"The hoteliers in the area of the Grand Mosque know that people would pay any amount during this time of year so thats why this year the prices are ridiculous," said Ms Abdallah.
A senior manager at Kanoo Holidays in Saudi Arabia, a division of the Dubai based Kanoo Travel Agency, pointed out that the only people affected by the price hike are travellers that book their hotels without a travel agency.
"As a travel agency we have a contract with the hotels from the beginning of the year so our prices were not affected by the recent increase," he said under condition of anonymity. He added that most of the hotels still standing that have a view of the Grande Mosque are five-star hotels. "The closer you are to the mosque the more expensive it gets. At the same time it's very convenient for pilgrims because the other hotels at at least 30 minutes away from the site."
Yet, as the number of hotels in the country increases, the added competition is expected to slow down prices.
"It's all a matter of time," said Ms Abdallah. "When we have more hotels it'll balance out the high demand."
Statistics compiled by Jones Lang LaSalle, the hotel consultancy company, showed Saudi Arabia was expected to have about 130,000 rooms by 2010, up from 118,000 last year. The country has attracted 17 million foreign visitors a year, most of whom are pilgrims from the GCC and further afield.
Once complete the Grand Mosque renovations will create space for an additional 500,000 worshippers and "change the face of Mecca", according to the city's mayor.
Up to 1,000 properties over an area of 300,000 square metres were demolished to make way for more prayer space on the northern and northwestern parts of the mosque, local Saudi newspapers have reported. The government has allocated US$1.6bn (Dh5.9bn) in compensation for the buildings, which were demolished at the beginning of the year.