Hotel Industry in Saudi Arabia: 85% Increase in Hotel Rooms in 2 Years

Interview with Abdullah Saad Al-Mogren, General Manager of Riyadh Palace Hotel

Let’s start with the tourism sector in Saudi Arabia. The country is not very well known for its tourism sector, especially leisure tourism, but it is very well known for its MICE tourism and for its religious tourism. Millions of people travel for Hajj and Umrah every year, which generates a lot of business activity, on the back of strong economic growth and governmental projects, and this feeds in to the number of people arriving in the country for business. What is your view of the tourism sector, and especially of business tourism?

Saudi Arabia is now starting to encourage and support both the leisure and the business tourism by creating a private sector for tourism, with one big commission for tourism, the Saudi Commission for Tourism and Antiquities. The main role of this Commission is to encourage and supervise this big economic industry, which is now starting to expand, and it has become very professional in supporting the hotels and tourism in Saudi Arabia. Nowadays we feel that there are many plans for the industry, it is being well advertised and the hotels have been classified. An increase in hotel rooms of 85% is expected over the next two years, which looks like a boom in the industry in Riyadh, and in general in Saudi Arabia. This will be a very good opportunity for the visitors who are coming to Saudi Arabia, as they will find a lot of opportunities and variety in the hotels and furnished apartments, for any kind of leisure activities.

Do you feel that the number of business tourists arriving is increasing?

There hasn’t actually been all that much of an increase because people visiting Saudi Arabia need to obtain a tourist visa. This is the main obstacle for visitors coming to Saudi Arabia. I think this will become less of an obstacle with the support of the new regulations and as the government makes moves to support the Saudi Commission in helping visitors to obtain visas. If they achieve this main goal, I think it will cause another boom in the country for leisure and tourism in Saudi Arabia. I hope they succeed in getting this through; we are ready to receive more visitors and the international hotels and chains also have all the set-up in place to accommodate this, so we are waiting for it to be approved.

Do you feel that this mega project has triggered an increase international business tourism? Are the occupancy rates improving year-on-year or are they static?

As I told you, we have recently planned for an 85% increase in the supply for hotel rooms in Saudi Arabia. This will fuel competition. Yes, we are hoping to get more business and more visitors, but supplies will also be at almost 80%, which is an enormous figure. I think that the hotels will also compete to get customers, so price-wise, things will be maintained as they are, if not reduced. There is no big hope that prices will increase.

As I told you, we have recently planned for an 85% increase in the supply for hotel rooms in Saudi Arabia. This will fuel competition.

In terms of the number of five-star hotels that Riyadh has right now, how many are there at the moment, and how many are going to be entering the market in the near future?

Right now there are 13 five-star hotels, with a total of almost 6,000 rooms in Riyadh. This is not a large number, but as I told you, it is set to almost double over the next two years.

And what is the average occupancy rate in the industry?

The average in the industry in Riyadh is about 65% around the year, which is a good figure, but some hotels are even achieving 80% or more.

What is your strategy for becoming the market leader in this industry and to beat the competition?

The market leader will be the one with the best plans, the one that knows what its customers need, provides good facilities in the hotel and can take care of the customers. And also those who do some big early-bird contracts to guarantee the number of good occupants.

What are the major challenges facing the industry?

Nowadays, the major challenge is to find good, talented labourers; we are currently facing a lot of problems in terms of finding the right people because of the boom in the industry. As well as this, the Ministry of Labour has imposed some Saudization restrictions on employment and although this provides opportunities for Saudis to work in the hotel industry, it is not being supported by the Saudis, who do not generally like to work in service, that is, in the minor or lower jobs. Young Saudis are not attracted by these kinds of jobs, but we are hoping that the next step will be something to help us find labour for the minor jobs, as we are currently feeling the effects of some restrictions and obstacles to getting the right staff. I think all the hotels are suffering from not getting the right labour for the minor jobs.

What is the Saudization rate currently prescribed by the Ministry?

Right now the rate is 18% for Saudis, but it will be increasing yearly, which is looking hopeful for us. Of course, all the hotels should cooperate with the government in training the Saudis for the good, ideal jobs with a good income, but I think almost 65% or 70% of the jobs in the hotels are service jobs such as housekeeping, waiting and kitchen staff, which is where you find the labourers working, whereas Saudis don’t like working in these jobs. However, I think you will find that Saudis enjoy working at the managerial level, in mid-management and in some reception jobs.

There is allegedly a high turnover rate in services. Do you find that it is hard to retain staff in this area?

Yes, the turnover rate is quite high for Saudis because the government offers good employment opportunities and Saudis always like to work in the government because they feel it is a secure place to work, the hours are better and it is safe for them to work in the government.  In addition to this, a lot of government jobs are offered every year. So although we actually train our people and support them and give them good salaries, some Saudis target the government jobs and we cannot stop them from doing this. However, those who do work in the hotels enjoy the environment and atmosphere of their jobs, and when people like their jobs, they work in them for a long time and move up to higher positions and become managers and general managers.

Now let’s move on to look at the figures for tourism. Are these figures growing year-on-year or are they remaining stable?

The number is growing, although not at a very fast rate because, as we said earlier, although there are some people who are attending seminars and symposiums, visiting government officials and coming on business trips, it’s not the number that we are hoping for. The main category that we are currently getting is local people, but we are hoping for more visitors in the international category and from other segments of business such as leisure and business – international business visitors – because this is the main source of good income for the hotel industry.

What about Saudi Arabia’s potential for leisure tourism? Do you feel that there is a lot of potential here, or not as much?

Well, the locals do not generally choose to stay in hotels. There is some local leisure tourism, but the families generally prefer to stay in furnished apartments as these offer more comfort. Saudi families tend to be rather large and the hotels are more suitable for couples and business visitors, not large or medium-sized families.

And what about international leisure tourism?

Right now we don’t feel that international leisure tourism will increase unless the tourist visa for leisure tourism is approved.

Do you think there will be a lot of demand for this visa?

Of course. Some travel companies have already started to get their permissions sorted out and trip advisors and trip organisers are also getting enquiries. They would still like to get more, of course, but for those places that are popular with visitors, people are just waiting to get their visas.

What are the main tourist attractions that Saudi Arabia can offer international tourists?

Well, Saudi Arabia is a very big country with a lot of sites of historic interest such as Mada’in Saleh, Abha and Mecca and Medina. The eastern provinces also offer a lot of places for tourists to enjoy. Then there are the big, wide deserts, which offer a lot of different activities and the different climate in Saudi Arabia which allows you to visit and enjoy the country all year round.

What about Riyadh itself?

Riyadh itself is good for those who want to come and see the desert. We feel that the people who come from outside Saudi Arabia particularly like going to the desert. They enjoy camping there and visiting the small villages and farms around Riyadh, to get a feel for the Saudi culture. There are in fact specific trip organisers who offer programmes for visiting the areas around Riyadh and if there is anyone who would like to visit somewhere specific, we can organise trips for them, one day visits, so they can enjoy visiting the local places round here.

Can you tell us about the hotel itself, about its facilities, its history – I understand it’s one of the oldest hotels in Riyadh?

Riyadh Palace Hotel is a 5-star hotel with 304 en-suite rooms. It’s owned by a Saudi hotel service company, it opened in 1981 and offers a lot of facilities such as rent-a-car, meeting and banquet facilities, outside catering and business centres. We also renovate the hotel from time to time and are currently updating the final touches to the international theme for our decor and for our visitors, who think that Riyadh Palace Hotel has now become a big, very well-known name in Saudi Arabia. We are also linked to international trip organisers and booking engines all over the world.

Riyadh Palace Hotel is a 5-star hotel with 304 en-suite rooms.

What is your vision for the hotel? International expansion?

The only focus for Riyadh Palace is on its interior. We are going to renovate the banquet halls and the kitchen, and we are going to renovate the lobby and carry out some restoration work. Expansion is the mission of the holding company and they are planning to open more hotels in Riyadh.

How much are you planning to invest in the expansion work?

The number runs into hundreds of millions. There are plans to build a new hotel in the north of Riyadh. I believe this project is currently underway and, Inshallah, I hope it will be finished soon and another branch of Riyadh Palace will be there.

To conclude, are you optimistic about the future of the industry?

Of course. As I said, the boom is there, but also the good hotels, that is, the ones that provide a good service and take care of their customers, have their good name and good reputation and wherever they go, I am sure they will have their own market share.