How Saudi Arabia's hotel industry performed during corona

22 April 2021 4 min. read

The Covid-19 crisis has had an unprecedented impact on the hotel industry in the Middle East, with Saudi Arabia no different. In its latest ‘KSA Hospitality Market’ report, researchers from Deloitte present the magnitude of the impact across the Kingdom’s major touristic cities of Riyadh, Jeddah, Makkah and Al Khobar. 

In 2020, Riyadh recorded an occupancy of 49% for 2020, compared to 60% in 2019, while Average Daily Rate (ADR) declined by 9% over the year, to SAR 544. As a result, Revenue Per Available Room (RevPAR) saw a reduction of approximately 26%, to SAR 268. 

Meanwhile, capacity increased further, with the delivery of approximately 850 new keys which included the opening of Le Meridien Riyadh and Courtyard Riyadh Northern Ring Road. The supply will continue to grow in the coming years according to Deloitte, with an additional 5,300 hotel keys expected to be delivered between 2022 and 2025.

Riyadh hotel performance, 2015 to 2020

Jeddah’s hotel occupancy for 2020 was at 37%, compared to 58% in 2019, while ADR declined by 35% over the year, to SAR 613. As a result, RevPAR dropped by 58%, to SAR 230.

Because Jeddah’s hotel performance is in part linked to that of Makkah (which experienced severe visitor restrictions between March and October), the city witnessed relatively strong declines in both ADR and occupancy, resulting in a reduction of RevPAR, of up to 80% compared to the same period in 2019.

While there were no significant new hotel openings in 2020, approximately 2,700 hotel keys are expected to enter Jeddah’s accommodation scene market in 2021. An additional 2,300 hotel keys are expected to be delivered between 2022 and 2025.

Jeddah hotel performance, 2015 to 2020 

Makkah’s occupancy for 2020 was at 25% for 2020, compared to 61% in 2019, while ADR declined by 45%, to SAR 323. As a result, RevPAR dropped by 77%, to SAR 81. 

The Covid-19 pandemic severely impacted religious tourism with occupancy as low as 2% during the first week of March after the suspension of Umrah visits. The combined effect of double-digit decline in both ADR and occupancy resulted in a RevPAR of SAR 81, 4.4 times less than the RevPAR observed in 2019. 

Similar to Jeddah, there was no major hotel openings in 2020, although approximately 4,500 keys are expected to be delivered in 2021. While some of the hospitality projects under construction have been postponed, some have also been cancelled. Future supply will see a flatter delivery of approximately 11,800 keys between 2022 and 2025.

Makkah hotel performance, 2015 to 2020

Lastly, Al Khobar recorded an occupancy of 53% for 2020, compared to 56% in 2019, while ADR increased by 1% over the year, to SAR 429. As a result, RevPAR decreased by 3% only, to SAR 230. 

The impact from the COVID-19 pandemic was less significant when compared to other KSA cities, largely driven by an increase in domestic tourism. The overall market witnessed a marginal decrease in occupancy and a slight increase of 1.4% in ADR.

Three new hotels opened in Al Khobar in 2020, namely The Ascott Corniche Al Khobar, Centro Hotels by Rotana Corniche Al Khobar and Voco Al Khobar, adding 550 keys to the market. Approximately 3,200 additional keys are expected to be delivered between 2021 and 2025.

Dammam - Al Khobar hotel performance, 2015 to 2020

Back to business?

The financial strain during the Covid-19 crisis is prompting hotel operators and investors to “reassess their strategies, focusing on performance enhancement, operational efficiency and review of management contracts,” said Deloitte’s report. For some, these measures will be sufficient to stay afloat, for others however, they might come too late with distress expected to rise over the coming period. 

Commenting on the outlook for 2021, Robin Williamson, Head of Real Estate at Deloitte in the Middle East, said: “While the KSA hotel market has experienced a major shock and has had to adapt during a very difficult period, the vaccine roll out and the development of government-led tourism projects are expected to expediate recovery, with performance returning to much healthier levels.”

Dunia Joulani, Head of Travel, Hospitality & Leisure at Deloitte Middle East added: “The long-term outlook for Saudi Arabia’s hospitality market looks encouraging as the development of government-led tourism projects will undoubtedly contribute to the growth and evolution of a unique industry in the Kingdom.”