Supply growth drives down performance at Jeddah hotels

InterContinental Hotels Group has signed a master development agreement with Saudi Arabia's Al Hokair Group to develop at least 10 Holiday Inn Express hotels within the next 15 years.  
November data on Jeddah reported supply growth of 8.1 percent and demand growth of 3.4 percent year over year. Photo credit: helmutkunert / CC BY-ND 2.0

STR’s preliminary November data for Jeddah, Saudi Arabia, indicates negative performance comparisons affected by continued supply growth.   

Based on daily data, Jeddah reported supply growth of 8.1 percent and demand growth of 3.4 percent year over year.

According to STR, the strong supply continues to affect performance levels in the market. Occupancy at Jeddah hotels fell 4.3 percent to 43.9 percent, while average daily rate dropped 10.1 percent to SAR624.69. Revenue per available room dropped 14 percent to SAR274.35

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These numbers are a significant shift from August, when year-over-year occupancy improved 9.7 percent to 73.4, ADR grew 9.6 percent to SAR1,350.97 and RevPAR rose 20.3 percent to SAR991.76, the analysts indicated.  At the time, supply was up 6.3 percent while demand had grown 16.6 percent—a much more favorable balance, according to STR. But those numbers, in turn, followed a difficult spring. The city's absolute occupancy level in April was the lowest for the month since 2004, while the absolute RevPAR level was the lowest for the month since 2008.

STR analysts noted in May that heavy investments in the region, which led to a 15.8-percent increase in supply for 2017, were making it difficult for hoteliers to stabilize RevPAR. 

As of last month, Lodging Econometrics reported Jeddah's pipeline had 58 hotels and 11,520 rooms, reportedly the city's highest counts since 2007. After this year's ups and downs, with supply outpacing demand and declining occupancy, ADR and RevPAR, a strong pipeline may not be what the city needs, noted STR analysts, who added the winter months are typically slower for Jeddah hotels.