IHG has Signed a Master Development Deal with Al Hokair Group to Bring the Holiday Inn Express Brand to Saudi Arabia

Date: April 2018

Location: Saudi Arabia

Name: 10 Holiday Inn Express hotels over 15 years

Developer:  Al Hokair Group, who will roll out at least 10 Holiday Inn Express hotels over next 15 years. The Group started in 1975, under the leadership of Sheikh Abdulmohsin Alhokair, and now has 79 entertainment centres and 34 hotels in Saudi and UAE, under the Marriott, Radisson, Golden Tulip, Accor brands, as well as IHG.

IHG currently operates 31 hotels across four brands including InterContinental Hotels & Resorts, Crowne Plaza, Crowne Plaza Hotels & Resorts, Holiday Inn and Staybridge Suites in Saudi Arabia. Six of the hotels are owned by Al Hokair Group.

Under the terms of the deal, Al Hokair Group will develop the real estate and operate the hotels under a franchise agreement with IHG. Matthew Tripolone, VP, development – Middle East & Africa, IHG, told Hotel Analyst: “We’re an asset-light company – the question of equity wasn’t asked of us, it wasn’t needed”.

Tripolone said that Saudi Arabia was an area the group had looked at before, “but we didn’t think that the market was ready, Saudi Arabia was an upper-upscale market. That’s changed now with downward pressure on rates, development costs rising and there is a growing segment of the market looking for more value for money – both owners and guests.”

Sami Alhokair, managing director, Al Hokair Group, said the group was “delighted to further strengthen our partnership with a global leader such as IHG, who continue to be a trusted brand in Saudi Arabia.

IHG’s portfolio aligns with our objective to strengthen our presence in the Kingdom as well as our commitment to Vision 2030. Holiday Inn Express is world-renowned brand, offering great value to the guests and, in the absence of an adequate supply of mid-market hotels to cater to the increasing demand, this signing presents us with unprecedented opportunities to capture the volume segment.”

Vision 2030 has three main pillars: the status of the country as the “heart of the Arab and Islamic worlds”; the determination to become a global investment powerhouse; and finally to transform the country’s location into a hub connecting the three continents: Asia, Europe, Africa.

The Kingdom plans to create 1.2 million new jobs in the industry, and last year saw the state allocate USD2.64bn for six tourism projects, with further investment expected this year.

Despite IHG’s recent launch of Even into the mid-market, the group went with Holiday Inn Express, Tripolone said: “Even is mainly in the US and Australasia. We wouldn’t want to rule it out, but at this stage we think the market will embrace the Holiday Inn Express brand. Once Even is at a mature level we would love to roll it out.

“There are a number of interesting new projects which the Saudi government is funding – notably the Red Sea Project – which shows that there is still a market for luxury hotels, but there is not the opportunity for roll out as there is with Holiday Inn Express.”

According to STR, Saudi Arabia reported declines in occupancy, ADR, and revpar in the third quarter last year, with the former down 1.7% to 55.3%, while ADR was at an average of SAR 808.49 (USD215.574) down 8.4% on the year. Revpar was down by 10% at SAR 446.98.

The Kingdom reported a 7.2% year-over-year increase in supply for the quarter, which countered a 5.4% uplift in demand. The country currently has more than 64,000 hotel rooms in the pipeline, which STR said should continue to affect performance levels in the short term as new properties come online.

Tripolone commented: “At the moment there is not a concern over over-supply, it’s a short-term issue. The Saudis are moving away from dependence on oil and towards tourism and the and the demand will be there. There may be some short-term problems, but not in the medium and long term.”

THPT Comment: HA Perspective by Katherine Doggrell say : As with many of the oil-rich regions, the Kingdom has noted the increased number of Priuses being sold – and the slowdown in the gushers from their wells – and decided to take affirmative action before the deserts stop bestowing wealth and return to being merely inclement.

Saudi Arabia is far from alone in its planning, there are Visions popping up all over the place. Where it has an edge is in religious tourism, hosting as it does the Two Holy Mosques, where last year two million pilgrims travelled to perform the Hajj.

According to BMI Research, religious tourism already accounted for 40% of tourist arrivals in the country last year and had the potential to significantly expand, as the government pushes for additional hotels, high-speed railways connecting Mecca and Medina and a metro network in Mecca to allow “the number of pilgrims visiting the country for Hajj to recover, after experiencing multi-year declines”.

Less a matter of ‘if you build it, they will come’ than ‘they will come, now build it’.

First Seen: Hotel Analyst