Dur Hospitality Co. plans to tap financing from commercial banks as the Saudi property and hotel developer expands in the world’s largest oil supplier.
“Our balance sheet is extremely strong and under leveraged right now,” Chief Executive Officer Badr Albadr said in an interview in Riyadh yesterday.
“This expansion will be done partially by our own cash flow. A bigger component will be from commercial bank loans.”
Across Riyadh and other Saudi cities, companies like Dur Hospitality are opening properties to meet rising demand as the Arab world’s biggest economy expands. Growth is forecast at 4.4 per cent this year, the second-fastest pace along with the United Arab Emirates in the six-nation Gulf Cooperation Council after Qatar, according to data compiled by Bloomberg.
Dur Hospitality, previously known as Saudi Hotels & Resorts Co., plans to spend SAR1.4 billion ($373 million) during the next seven years to increase its portfolio of hotels and luxury residential complexes. The Riyadh-based company this week announced a SAR300 million investment to develop two Marriott hotels in the capital of Saudi Arabia.
Adding to the SAR580 million facilities that Dur Hospitality already has, the new financing will be used to buy land and build hotels, Albadr said. Last year, the company obtained a SAR309 million Islamic facility from Riyad Bank to finance building a hotel in Riyadh.
There are “huge areas of growth” in terms of the number of travelers and the quality of services and types of rooms needed, Albadr said. “We have identified a clear gap that we can fulfill. We will expand into the three- to four-star segments for mainly the business traveler.”
Demand for hotel services in the kingdom is being driven by higher consumer spending. Point of sales transactions more than doubled between 2009 and the end of 2013, according to data on the website of the Saudi central bank. The kingdom is also in the process of opening its stock market to foreign investors.
Changing social habits in Saudi Arabia, a conservative Sunni-Muslim country, are opening up new business opportunities for companies, according to Albadr.
“We are witnessing a transformation in people’s habits,” he said. “When you used to go back to your hometown, you stayed with your relatives. Not any more.”