Snapshot: Saudi Arabia leads Middle East hotel construction

Dubai is set to host the next World Expo in just four years, and is making progress on its goal of having 100,000 hotel rooms open by the time the event begins. But amid concerns that the Emirate's supply may outpace demand, developers and investors are looking to other cities and countries to expand their reach. 

According to STR Global's most recent Global Pipeline Report for December 2015, the Middle East as a region has 514 hotels under contract for a total of 147,746 rooms, an increase of 38.7 percent compared with December 2014 and a 51.5 percent year-over-year increase in rooms under construction. The Middle East reported 80,999 rooms in 248 hotels under construction for the month.

Makkah (also known as Mecca), Saudi Arabia has the largest number of rooms under construction with 21,068 rooms in 13 hotels. Three other markets reported more than 5,000 rooms under construction: Dubai (20,260 rooms in 63 hotels); Doha, Qatar (6,926 rooms in 29 hotels); and Riyadh, Saudi Arabia (6,595 rooms in 29 hotels).

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The Fairmont Makkah Clock Royal Tower

Who's Building Where?
In Saudi Arabia, Jeddah, Riyadh, Makkah and Madinah have been attracting solid interest from global brands. One to One Hotels and Resorts COO Philippe Harb told Hotelier Middle East that Al Aziziyah (a neighborhood in Makkah) is considered "a prime district" for future hospitality supply, and that the brand would look to grow there. "Furthermore, there are ongoing negotiations to manage four additional hotels in KSA and increase our presence and strength in the market.”

Sami Nasser, SVP operations of Middle East, Africa & India for FRHI Hotels & Resorts, said that his company has the Fairmont Jeddah, Swissôtel Jeddah, and Raffles Jeddah, all slated to open before 2020, in addition to Fairmont Riyadh, Business Gate poised to open next year. Ali Hamad Lakhraim Alzaabi—founder, president & CEO of Millennium & Copthorne, Middle East & Africa—told the site that his team has more than 10,000 rooms in its pipeline. “The next hotel to open will be Millennium Hotel Hail, a 191-room upscale five-star property situated opposite Hail Economic City. The opening will be followed by Copthorne Riyadh by Millennium, a 145-key property with an excellent location on King Fahd Road in Riyadh.” The company has also signed several new hotels this year: Four agreements with Taiba Holding Company will bring the Biltmore brand to Riyadh and a 299-room Grand Millennium Hotel set to open in Madinah. Both of these are slated to open in 2018. Four hotels are signed for the Knowledge Economic City in Madinah, including two Millennium hotels and a Studio M and Millennium Executive Apartments, the Group’s budget and service apartment brands.

“The outlook for Jeddah over the next 12 months is mixed, as the city is poised for a significant influx of new supply, particularly in the mid-scale segment and serviced apartments," Christopher Hewett, associate director of TRI Consulting, told the site, noting that supply can drive down both demand and ADR. “The outlook for Riyadh is cloudier as the continued low price of oil impacts government revenue streams. With large government-backed projects driving demand in the capital, potentially reduction in spending could have a flow on effect through reduced demand for the city’s hotels. With a strong pipeline of hotel rooms expected to enter the market over the next 12 months, the city’s hoteliers are bracing for a challenging period ahead.”

Bahrain, meanwhile, is seeing "continued infrastructure investment from the GCC aid fund," as property consulting firm CBRE noted in its Q4 2015 Bahrain MarketView. According to the report, the last quarter of 2015 saw significant consolidation in the country's hospitality sector, with steady progress made towards the launch of two new developments in early 2016: The Rotana Downtown in central Manama, along with Wyndham Grand at Bahrain Bay will add a further 509 rooms to the five-Star hotel stock. The Marriott Residence Inn at Water Garden City is also expected to be completed in 2016, and Emaar Hospitality Group will reportedly build five new hotels in the Kingdom by the end of 2018.

Just a few weeks ago, Wyndham Hotel Group announced four new hotels for the Middle East, with new properties in Saudi Arabia, Jordan and Bahrain opening under its Ramada Worldwide flag.

And then there's Dubai, which has new budget and luxury hotels slated to open from local operator Roda Hotels, with more in the pipeline across coming years. The operator has more than 4,000 rooms under development across 12 projects in both luxury and budget properties, Hotelier Middle East is reporting, and will manage more than 4,500 rooms by 2018. Roda Hotels is also currently embarking on a luxury US$1.09 billion (Dh4 billion) mega development in Dubai's historic district of Deira. 

The company launched two years ago as the hospitality arm of Dubai International Real Estate.