RIYADH, Saudi Arabia — Saudi Arabia's public and private sectors are united in working toward the country's Vision2030 goal of welcoming 100 million tourists per year, which requires the development of an additional 315,000 hotel rooms.
Mahmoud Abdulhadi, deputy minister of investment attraction for the Ministry of Tourism Saudi Arabia, said meeting those development goals must also be done sustainably. To do so, the public and private sectors must forge close relationships.
“On regulations, to facilitate processes, to bring things together. When we sign with a partner, it is all their own work. [The ministry] just helps fill in the gaps,” he said, speaking at the Future Hospitality Summit held earlier this month.
Muhammad Hassan Al Amir, CEO of real estate investment firm and advisory Aims Hospitality, said alignments between private and public partners are continually being tweaked to “create opportunities that have never been there before.”
He said well-thought-out collaboration is necessary to create more tourism flow to help match Saudi Arabia's ambitious demand levels.
Elias Abou Samra, CEO of Riyadh-based Rafal Real Estate Development Co., said progress so far in creating the right landscape bodes well.
“What really matters is visibility, certainly as these projects have come in all at once. What we need is data. Individual players have limited data. Another overarching item for all segments is the qualifications of locals,” he said.
Samra added Rafal, among its other real estate investments, has developed two hotels that have already matured and paved the way for more.
The future for his company is not luxury hotels, he said.
“Going forward, we see lots of hotels. As a midscale operator, we’re pushing for more sensible, home-grown products and local experiences,” he added.
Abdulhadi said clarity from his department will allow white spaces to be uncovered and the steps put in place to develop them.
“We have worked on increasing that clarity — on what the government is spending, on what components are going in and on what development is happening. We’re developing the tools, transparency and improvements, and then we started on the facilitation piece, as investors needed help,” he said.
“The second reason is a little more selfish, as we knew there was a human-capital gap. The net result is that over the last two years we have seen double the investment coming in of the previous three to four years. There is some legacy investment in there, but we’re also seeing new investment in both single assets and portfolios, a major shift in how people are viewing the market and a change in their risk curve. You will see an increase in quality and better regulations as to what is required from all sides,” he added.
During the conference, Kerten Hospitality announced it had signed an agreement valued at 1.5 billion Saudi riyals ($400 million) to develop all its Saudi hotel projects under one umbrella. The hotels include the 70-room Cloud 7 hotel in Abha, a development in partnership with investor Rooh Al-Reef Hotels. That partnership has at least 12 hotels in its pipeline.
The panel’s moderator, Kerten’s CEO Marloes Knippenberg, did not mention her deal during the panel but said that Saudi Arabia largely being a blank piece of paper for hotel development will help lifestyle hotel companies to create destinations people “want to be part of, with a sense of smell and taste, something you cannot put in a box. It is not all about product.”
Kindly Consideration
Abdulhadi said tourism in Saudi Arabia is a nascent sector with huge growth potential, and the goal is for the country to be a top-five destination in terms of visitors.
“We will work with [the private sector] as ultimately this is their sector,” he said. “It is our job to give them the tools to convince their investment committees, and we need quality. I was a banker, and if you do not have right data, even a good decision will end in a bad result.”
Al Amir added benchmarking is key, but the country has vast experience in looking after visitors, mostly from religious pilgrimages, including the hajj to its Holy Cities.
“We’re a family office, mostly having worked in Madinah and Makkah. Now we need to work with partners more closely to find gaps, but I believe it is easier to go to the investment committee with alternative assets as [their members] are locals. They understand the demand,” he said.
Rafal’s Samra said more conversation is needed regarding hotel development in remote areas where sustainability is not so simple.
“I would love to see more conversion possibilities. It is not a problem the minister of tourism can solve. It is an urban problem,” he said, adding his firm also is looking at glamping opportunities.
Abdulhadi said the country does not have the old inns that hotel guests enjoy so much in Europe.
“Historically, that is not how the country developed. It is interesting for us on this side of the fence is to see the varied interests and project desires. Many will look at this in different ways, but one thing we know is the old model, concentrating on square boxes in the large cities, is fading,” he said.
“There are riskier segments, but the [sovereign wealth] Public Investment Fund is seeding these sectors by creating demand and benchmarks. I am sure the private sector will outrun us in developing and perfecting,” he added.
Abdulhadi said no investor in his right mind would wade into a giga-project in the middle of nowhere without support at every level.
Al Amir said more comfort will come as airlift improves around such projects.
“The trends are picking up. The momentum has begun,” Samra added.