Makkah & Madinah

The Jabal Omar Project will introduce over 12,000 hotel rooms across 15 international hotels.

The Jabal Omar Project will introduce over 12,000 hotel rooms across 15 international hotels.

Towards Vision 2030

Several initiatives have been kicked off to boost the economies of the holy cities of Makkah and Madinah – cornerstones of Saudi Arabia’s Vision 2030 and hosts to millions of pilgrims from around the world throughout the year, says ABDULAZIZ KHATTAK.

July 2019

The development of the two holy cities of Makkah and Madinah features prominently in Saudi Arabia’s 2030 Vision plan, and remains a focus for the government because of the importance they hold for the country, religiously, culturally, and economically.

The cities host millions of pilgrims yearlong for both Umrah and Hajj, with over 2 million coming for the latter once-in-a-year event alone, and several millions for Umrah throughout the year, generating billions of dollars in revenues for the kingdom, and a spillover effect throughout the Middle East, for aviation services in particular.

But these numbers also present a massive logistical challenge for Saudi Arabia, which has been making significant investment in infrastructure.

Under the kingdom’s Vision 2030, Makkah is undergoing major transformation, with several government initiatives paving the way for the city to increase its capacity to 30 million pilgrims annually by 2030, says a report by leading real estate firm JLL Mena.

Last month, the Royal Commission for Makkah City and Holy Sites (RCMC) approved a strategic development plan for Makkah and the holy sites, while also endorsing the establishment of the Holy Sites Company for Development at a meeting chaired by Crown Prince Mohammed bin Salman.

Makkah was also in the limelight at the second Makkah Region Economic Forum (MREF) held in March under the title “The Road to an Urban Future: Invest in Makkah.” It focused on four main topics: Urban development, public services and infrastructure, transport and logistics, and innovation in Hajj and Umrah, in addition to shedding light on new investment opportunities in the Makkah region.

Last year’s edition offered investment opportunities worth more than SR1 billion ($266 million), paving the way for major projects in the region. These included a sacrificial meat waste management factory (SR88 million); support services for people with special needs (SR24 million); Qarn Al-Manazel development project (SR50 million); a food factory (SR90 million); a local product factory (SR175 million); Makkah Gate development project; Downtown Terminal Project (SR85 million); and Makkah and Madinah historical sites development project (SR425 million).

The Grand Mosque of Makkah is in the midst of an expansion, increasing its capacity to 2.5 million with the city also constructing the first new Islamic Faith Museum of Makkah just 7 km away.

The government has been spearheading the development of infrastructure in these holy cities to support the growing numbers of pilgrims. For instance, the Makkah region in Q1 2019 received a sizeable share of contract awards across the kingdom, getting SR8.2 billion (17 per cent) of the total SR48.9 billion. Also, of the 88 road contracts worth SR5.1 billion signed by the Ministry of Transport in February, 15 contracts worth SR984 million were for projects in Makkah.

 

Hotels & Residences

Both public and fully private entities are involved in development projects across Makkah and Madinah to provide accommodation facilities for visitors to these cities. For instance, the Al Balad Al Ameen Development and Urban Regeneration Company (ABAM), has been involved in improving housing conditions in five informal, unplanned districts in Makkah.

ABAM’s most significant initiative to date, however, is Makkah Gate, a SR60-billion, 25- to 30-year project designed to house more than 750,000 people on a 110-sq-km plot of land about 14 km west of the Grand Mosque, according to a report by the Oxford Business Group.

Meanwhile, Rou’a Al Haram Al Makki, which spans 854,000 sq m, will add 9,000 residential units to Makkah’s supply, in addition to 360,000 sq m of commercial space. The project is estimated to contribute $2.1 billion to the national GDP once operational, says a JLL report.

Another major project, the Retaj Makkah development featuring 4,551 units (both apartments and villas) is being developed on a 1.3-million-sq-m area in Al Umrah Al Jadidah district. Handover is expected in 2021.

The JLL report adds that Makkah will experience a continued increase in residential supply due to the completion of a number of mega projects, which are currently in the early phases of development.

The hospitality industry is perhaps the biggest beneficiary of religious tourism, and naturally both Makkah and Madinah lead other Saudi cities in the number of rooms. According to figures released by the Arabian Travel Market, the Saudi hospitality sector is set to grow 13.5 per cent per year to 2022, higher than the established markets of Oman at 11.8 per cent and the UAE at 10.1 per cent. Saudi Arabia is pursuing targets of 30 million visitors annually by 2030.

About 23,307 hotel rooms were reported to be under construction in 2018 in Makkah. The city is expected to witness the delivery of 12,300 keys in 2019 and 34,700 keys in 2020 which also represent a more diversified stock as operators adapt their offering to cater to the evolving traveller demographic and tourist influx.

While 2018 was challenging, the city remains a hot spot for hotel operators looking to enter the market for the first time.

The Jabal Omar Project is expected to see more than 12,000 hotel rooms introduced across 15 international hotels (with chains such as Marriott, Hilton and Hyatt Regency), according to a report by real estate company Savills.

 

Retail

The retail sector pipeline is expanding and diversifying to accommodate future tourist demands with major projects in their final phases accounting for a significant share of Makkah’s future supply. Operators are under pressure to create a greater mix of competitive shop-entertainment to cater for the influx of new visitors. 

Of the several retail centres currently under development and expected to be delivered in 2019 is the Center Almehaisne.

 

Transport

The recent opening of the Haramain High-Speed Rail, linking Makkah and Madinah via Jeddah, is expected to transport 60 million passengers per annum when in full use (see Page 58).

Progress on major infrastructure enhancements and increased connectivity are expected to boost Makkah’s tourism capacity and create a wave of development opportunities, according to Dana Salbak, associate at JLL Mena.

“The projected influx of pilgrims supported by a more connected and modernised city is driving positive investor sentiment in Makkah and creating huge development opportunities particularly in the supporting retail and hospitality sectors,” says Salbak.

 

Utilities

Among the largest projects in the power and water sector in the Makkah province is a 600-MW solar park that will be part of a larger 2.6-GW solar complex. The Renewable Energy Project Development Office (REPDO) in January said it would issue tenders for the solar park. Much of the capital for future wind energy projects is tipped to come from the Public Investment Fund (PIF).  




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