Hilton to Expand in Saudi Arabia’s Mecca as Pilgrims Increase

Nov. 11 (Bloomberg) -- Hilton Worldwide, acquired by Blackstone Group LP in 2007, plans to open more than one hotel in Mecca, the birthplace of Islam, as more religious pilgrimages spur demand for accommodation in Saudi Arabia.

“We don’t have enough of a supply of hotel rooms,” Shuja Zaidi, Hilton’s vice president of projects in Saudi Arabia, said in an interview in Riyadh yesterday. “There is a tremendous amount of money going into Mecca.”

Hoteliers and property developers are tapping new business opportunities in the Islamic holy cities of Mecca and Medina as the Saudi government seeks to accommodate more pilgrims. Saudi Arabia is building a $5.3 billion rail line that can transport 3 million people between the two cities and is expanding Jeddah international airport to handle 30 million passengers by 2012.

Over the next 10 years, developers and hotel companies will invest as much as 150 billion riyals ($40 billion) in Mecca, Zaidi said. Kingdom Holding Co., the investment company controlled by billionaire Prince Alwaleed, will open a five-star hotel with 1,000 rooms, restaurants and retail space.

Jabal Omar Development Co., a real-estate developer in Mecca, is building 27 hotels with a combined 15,000 rooms, with the first to open in 2011. There will be multiple Hilton properties there, Zaidi said.

“Every major hotel brand in the world will be present in Jabal Omar,” Zaidi said. “Hilton is a small portion of that.”

Zaidi declined to specify other developments Hilton plans in the area. The company, based in McLean, Virginia, already operates the 1,400-room Makkah Hilton & Towers in Mecca. In December, Hilton said it agreed to build as many as 13 hotels in Saudi Arabia in a partnership with Abdulmohsen Al-Hokair Group for Tourism and Development.

Hajj Pilgrimage

Saudi Arabia, the biggest economy in the Arab region, is the site of the largest annual gathering in the world during the annual Hajj pilgrimage to the birthplace of Islam’s prophet, Muhammad. More than 2 million people from 160 countries will visit Mecca this month for Hajj.

Even excluding Hajj, the number of annual pilgrims coming to Mecca is forecast to more than double to 10 million in five years, making Islamic tourism “the most lucrative market without a doubt,” Zaidi said. “We have seen an increase in affluent Muslims. The awareness of Muslims as people of faith has increased.”

The Makkah Hilton & Towers has about a mid-70 percent occupancy rate, Zaidi said. Single room rates jump to 2,500 riyals a night during Ramadan from 500 riyals at other times of the year.

Revenue at the hotel has fallen about 30 percent this year, as Muslims avoided travel to Saudi Arabia because of concern about catching H1N1 flu during the holy month of Ramadan, which ended in September, Zaidi said. The Saudi government started vaccinating health workers on Nov. 7 to stop an outbreak of swine flu.

“Ramadan was hit very hard,” said Zaidi, who is also the general manager of the Makkah Hilton & Towers. “A lot of people didn’t come because of swine flu.”

Ramadan, when Muslims fast from sunrise to sunset, falls on the ninth month of the year in the Islamic calendar.

To contact the reporter on this story: Glen Carey in Riyadh at gcarey8@bloomberg.net

To contact the editor responsible for this story: Shaji Mathew at shajimathew@bloomberg.net