Saudi firms scrap hotel joint venture as costs spiral

UDC

• Seera Group and AlUla Development Company terminate contract
• JV was for 215-key Choice-branded Clarion Hotel in AlUla
• Project cost estimated at $45m on 9,000sq m plot of land

A planned hotel joint venture between Saudi travel giant Seera Group and the AlUla Development Company (UDC) has been scrapped due to rising costs.

The two parties have agreed to terminate the contract, due to “the futility” of the planned investment in a new hotel project in Saudi Arabia.

In a filing to the Saudi Stock Exchange, Seera said the costs of the project were higher than agreed, adding that the partners have cancelled all contracts with consultants, designers and developers and will settle any financial claims.

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Last year, UDC and Seera agreed to form a joint venture company to develop and operate a 215-key Choice-branded Clarion Hotel in the central business district of AlUla, a city of the Madinah region in north-western Saudi Arabia. 

Seera held a 51 percent stake with UDC holding the remaining interest.

UDC is wholly owned by Saudi Arabia’s Public Investment Fund and responsible for launching operations to support the development of AlUla to create jobs and communities while preserving its cultural sites.

The project cost at the time was estimated at SAR170 million ($45 million) and was to be developed on a 9,000sq m plot of land leased from UDC. 

Seera Group

In the Tadawul filing, Seera said that the partners had so far contributed SAR14 million to the project, of which SAR4.7 million had been spent in incurred expenses.

The remainder will be returned to each partner according to their respective shareholding percentages, it added.

In March, Seera announced its first operating profit since the coronavirus pandemic and generated a gross booking value of SR9.3 billion last year, nearly double the figure recorded in 2021.

Revenue grew by 77 percent to SAR2.3 billion in 2022, turning an operating loss of SAR286 million in 2021 into a SAR3 million profit.

Saudi Arabia is experiencing an unprecedented boom in hotel development. Total costs for all the hotel rooms planned in the kingdom is estimated at $37.8 billion, according to property consultancy Knight Frank.

The kingdom will see the completion of 315,000 hotel keys by 2030, Knight Frank said.