Mecca hotels confident over occupancy rates for haj despite absence of 60,000 Iranian pilgrims this year

Photo: MECCA, SAUDI ARABIA  - JULY 6, 2015 : Pilgrims performing the tawaf around the Kaaba on July 6, 2015 in Mecca, Saudi Arabia / Shahreen / Shutterstock.com

This year’s haj will welcome around 60,000 fewer pilgrims as Iranians stay away but Mecca’s five-star hotels are still anticipating healthy occupancy.

As it approaches one of the busiest seasons of the year, Mecca’s hotel market is facing an unusual set of circumstances.

The holy city witnessed a series of safety and security incidents over the past 12 months that forced the government to take unprecedented measures to prevent reoccurrences.

Additionally, the ongoing tensions between Saudi Arabia and Iran saw the latter ban its citizens from making the annual pilgrimage. With an estimated 60,000 Iranians visiting the kingdom for haj each year, the ban is likely to make a dent in the Saudi pilgrimage industry.

“The situation will definitely affect the occupancy rates of some hotels within the holy city,” Adel Erfan, general manager of Movenpick Hotel & Residences Hajar Tower, told Salaam Gateway.

“Nevertheless, our hotel has traditionally relied on other key feeder markets across the GCC and beyond, so we don’t expect to be significantly affected,” he said.

Switzerland-based Movenpick Hotels & Resorts opened its Mecca property in 2011.

Sharing Erfan’s sentiment, Pascal Gauvin, chief operating officer for India, Middle East & Africa at InterContinental Hotels Group (IHG) also expects its Mecca property to maintain its position in the market during haj.

The British multinational group has been operating Dar Al Tawhid InterContinental Makkah since 2001 and is now preparing to open two Holiday Inn hotels in the holy city.

“Currently, we do not see an impact by these particular situations on our bookings in Mecca,” he told Salaam Gateway.

Similar optimism was expressed by Faisal Abdallah, group assistant director of communications at FRHI Hotels & Resorts. “Mecca is a holy city where troubles and violence are rare due to the spirituality of the occasions,” said Abdallah.

FRHI Hotels & Resorts operates three properties in Mecca – Raffles Makkah Palace, Swissotel Makkah, and Makkah Clock Royal Tower – and is opening its fourth in the city in time for haj.

Swissotel Al Maqam will be FRHI’s second Swissotel in the holy city and will be managed by Sarah Towers for Real Estate Investment.

“Our first guests will be checking in during September,” Abdallah confirmed to Salaam Gateway, adding that the new hotel was already sold out for haj.

VISION 2030

As the site of Islam’s holiest places Mecca is known for being one of the world’s most profitable hotel markets with around 8 million umrah visitors in 2015, according to the kingdom’s Vision 2030 document released in April. The number of umrah pilgrims this year reached almost 6 million in Ramadan alone, according to the Ministry of Haj and Umra.

The number of haj pilgrims last year was estimated at 2 million.

“The numbers are constantly increasing as the government has allocated large budgets to expand the holy Haram area, which will allow religious tourism to steadily expand,” said FRHI’s Abdallah.

Saudi Arabia has been placing greater emphasis on tourism as part of its Vision 2030 economic diversification strategy to reduce its dependence on oil revenues.

The tourism industry is the kingdom’s second most important after oil and gas. It contributed 3.5 percent, or 85 billion Saudi riyals ($22.6 billion), to the country’s gross domestic product in 2015, with haj and umrah accounting for 45 billion riyals ($12 billion), according to the Saudi Commission for Tourism and National Heritage (SCTNH).

With 2.7 million foreign pilgrims expected to visit Mecca every year by 2020, the kingdom is carrying out the largest expansion in history of the Grand Mosque to gradually increase its annual capacity.

The country’s Vision 2030 calls for the improvement of the country’s facilities and services as well as the development of major infrastructure projects.

These include the expansion of Jeddah’s King Abdulaziz Airport to handle 30 million passengers, the restoration of eight historic mosques in Mecca, and the construction of the Haramain high-speed train, which will link Jeddah to Mecca and Medina when it opens in 2018.

INFLUX OF HOTELS

With such strategic projects and encouraging forecasts, it’s no surprise that international hotel groups continue to expand into this lucrative market.

According to Matein Khalid, executive director of strategy at Asas Capital, a Dubai Financial Services Authority-regulated investment institution, Mecca hotels boast gross operating profits in the 60-65 percent range, exceptionally high by global standards.

One of the global chains that plans to broaden its portfolio in the kingdom is Starwood Hotels & Resorts. The American group plans to open Mecca’s first Sheraton by the end of 2016, as well as Westin Makkah and Four Points by Sheraton Makkah in April 2017 and May 2019 respectively.

On the other hand, Conrad Hotels & Resorts inaugurated its first hotel in the city in June this year. The opening marked the addition of Hilton Worldwide’s second brand into the city and the group’s 11th hotel in the kingdom.

DELAYED OPENINGS

Meanwhile, several planned openings appear to have been slightly postponed.

Shaza Hotels was targeting the third quarter of this year to open its 251-room establishment in Mecca but is now looking to launch it in 2017. The Dubai-based company was selected by AlRajhi Investments in 2015 to operate the property.

The world’s largest Holiday Inn also seems to have encountered delays. The hotel was scheduled to open in Mecca in late 2015 but has yet to start operating.

IHG had selected Al Majd Al Arabiah Company last year to manage the 5,154-room Holiday Inn Makkah Abraaj Al Tayseer, which is planned to open in two phases. A second property - the 1,238-room Holiday Inn Makkah in Al Aziziyah – is also planned to open soon.

“These hotels were added to our pipeline to cater to the rising demand of religious travellers visiting the holy city. In the near-term, we’re looking forward to opening them as two of the world’s largest Holiday Inn hotels,” Gauvin told Salaam Gateway.

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