Dubai: After hotels, resorts and theme parks, will Saudi Arabia’s hospitality and entertainment space extend to holiday homes too?
Industry sources say there is every chance the Saudi market will be as welcoming to holiday home or short-stay concepts as any other market. In fact, it is quite likely that as happened in Dubai, demand will build up for leasing luxury holiday homes and then expand to take in more pricing options. Short-stay properties aimed at the corporate traveller too could get some traction.
But it could all begin to bloom with luxury. “We anticipate the KSA holiday home market to be the same size as the UAE’s by 2026,” said Vinayak Mahtani, CEO of Dubai-based bnbme and which is ready to take a step into Saudi Arabia. “The luxury accommodation market in Saudi Arabia is estimated to be around $5 billion, and we are confident homeowners can easily expect 12-18 per cent return on investment by letting these properties out for short-term lets.
“We are optimistic our expansion will help us achieve our goal of over Dh100 million in revenues from the market in the next three years.”
Will short-stay gains take longer?
Some industry sources are not sure whether Saudi Arabia’s property market has enough options right now to create a scaled up holiday home marketplace. In many ways, the Kingdom has only started on a massive development of new residential capacity at its major cities. These could take another 4-5 years before these are completed for occupancy.
Plus, there exists peak demand from Saudi nationals and expats wanting to rent long-term. (Major Saudi cities have already seen hikes in property rentals as available supply turned scarce.)
“Dubai’s holiday home market boomed because there is available pipeline to feed both long-term and short-stay leases,” said the head of a property management company specialising in holiday homes.
No such doubts on Saudi hotel capacity
An estimated $110 billion is likely being budgeted to ‘deliver on the Kingdom’s hospitality vision’. Whether it’s a giga-project up by the sea or on the mountains, the Saudi vision has the backing of some serious cash.
“The hospitality sector is fast emerging as one of the key lynchpins in the transformative vision laid out for the Kingdom,” said Faisal Durrani, Partner and Head of Market Research – Middle East at Knight Frank. “With a rapid evolution in the range of tourist visas - including ‘free’ stopover options, a significant hotel key pipeline and the emergence of two new national carriers – Riyadh Air and NEOM Air – visitors will be spoilt for choice when trying to identify travel routes.”
Saudi hotel mix and demand
- As of now, 17% of the planned hotel supply are in the 3-star or below category.
- With 56% of the Kingdom’s population below 35 years, demand for 'various accommodation types will likely continue to emerge as a significant consideration for the industry', says Faisal Durrani of Knight Frank. We will need to think broader and incorporate the likes of luxury glamping sites and youth hostels to cater to this increasingly important segment of the market if it is to thrive and flourish, being mindful of the cultural sensitivities and the need for appropriate adaptations.”
More to follow...