On 17 May, Saudi Arabia cautiously opened its borders and ended months of strict border controls. While restrictions are still in place depending on source market, traveller vaccination status and reason for travel, the news was met with much relief both inside and out of the kingdom.
The country had moderate success promoting domestic travel while borders remained closed, but other popular Gulf destinations like Dubai are now open to Saudi nationals and residents. As a result, the kingdom must look to supplant domestic demand with international arrivals. It’s a tall order given that tourist visas are suspended and Umrah visas strictly limited.
For Riyadh, leisure travel has never been a primary demand driver. Prior to the Covid-19 pandemic, weekday occupancy and average daily rate outpaced weekend performance, a result of both climate and location as well as Saudi Arabia’s tight visa control. Covid-19 reversed the long-term trend and narrowed the gap between weekday and weekend performance, but weekday rates spiked almost immediately after the country reopened its borders in late May.
As the most populous city in Saudi Arabia and the country’s financial hub, Riyadh has been an important stop on GCC business travellers’ itineraries. However, under the Vision 2030 plan, Saudi Arabia seeks to further bolster Riyadh’s status as a regional business hub with activity centred in the King Abdullah Financial District. And with newly announced requirements for government and state-run business contracts to go only to companies headquartered in the kingdom by 2024, hotelier confidence in business demand has been restored, as evidenced by jumps in rate almost immediately following reopening.
Coastal craze
West of Riyadh and on the coast of the Red Sea, Jeddah has long been a beach escape for domestic travellers looking for relief during Saudi Arabia’s hot summers. With only 13% of the market’s 27 million total visits in 2019 arriving from abroad, according to Tourism Economics, the market was well-prepared to weather lengthy border closures.
Hotel occupancy hovered around 50% even during Ramadan and swiftly reached pre-Ramadan levels soon after. By the end of May, occupancy reached its second-highest pandemic-era level, superseded only by occupancy during the winter school holidays that coincided with the two-week Dakar Rally at the beginning of the year. Strong performance following both Eid al-Fitr and the kingdom’s reopening suggests that Saudi residents weren’t quite ready yet to trade the kingdom’s leisurely delights for foreign ones, a good sign for Saudi Arabia hoteliers.
Saudi Arabia’s reliance on domestic demand served the market well during its lengthy lockdown, and key markets Riyadh and Jeddah have not suffered from reopening borders, although for different reasons. For Riyadh, international arrivals outpaced any lost demand from domestic travellers, and for Jeddah, the seaside appeal and amenities proved to be a good incentive for residents to remain in the country for staycations. After weathering what looks like the worst of the pandemic, Saudi Arabia looks on track to maintain its reputation as a burgeoning global tourism and hospitality hub.
