Technology, Experientialism and F&B are redefining the retail and hospitality markets in KSA
Real Estate Insight from Susan Amawi, Head of Strategic Consulting (KSA), JLL
As global real estate markets settle into a new post pandemic norm, many of the trends that were evident before COVID are re-emerging. Nowhere has this been more apparent than in Saudi Arabia, where the retail and hospitality markets are being redefined by a combination of long term structural changes in addition to COVID related cyclical factors.
Three distinct but inter-related drivers can be identified, the application of new technologies, a focus on creating unique experiences and the emergence of innovative F&B concepts. These three trends are driving a convergence of the retail and hospitality sectors in a range of exciting new mixed use projects across the Kingdom.
Technology continues to shape all sectors of the real estate industry across Saudi Arabia and beyond, with AI and AR at the forefront of changes within the retail and hospitality sectors. Artificial Intelligence (Al) helps streamline supply chains and enhances customer experience, while Augmented Retail (AR) allows shoppers and guests to visualize purchases or hospitality experiences before purchasing them.
Virtual fitting rooms (incorporating smart mirrors) are a powerful technology with the potential to transform today’s physical retail stores and in-store shopping experience.
Major global retailers such as H&M, Walmart, IKEA and Sephora are all currently utilizing virtual fitting rooms, while self-checkout and cashier less stores are becoming increasingly widespread, especially in the grocery sector. In KSA, restaurants such as Piatto are using AI driven robotics to prepare and deliver food to their diners.
The hospitality sector is also being redefined by new technology. On line booking sites have dominated the market for a number of years and hotels are extending the utilization of digital technologies to reduce staffing levels and improve guest experiences through automated check in / out and room services.
Experiential. The desire to create unique and distinctive experiences is a defining trend across all sectors of the real estate market, with the hotel and retail sectors being no exception. Retailing is about far more than just buying things and the hospitality sector is seeking to provide much more than just a place to sleep. Savvy retail and hospitality operators in KSA are aiming to offer their guests a seamless experience, with new technologies and innovative F&B concepts both contributing to this journey.
The growth of the experience economy is having an increasing impact on the retail market in Saudi Arabia and elsewhere. Globally, 61% of adults report that they would prefer to spend money on experiences, including eating out, over purchasing a physical item from a store (GlobeSt.com). While JLL’s own research reveals that 48% of the Riyadh population describes themselves as very enthusiastic about exploring something new when it comes to restaurants with the dining experience incorporating far more than just the food.
Hotel operators globally are responding to the experiential economy in different ways. Virgin Hotels are rolling out their ‘Commons Club’ offering co-working memberships, meetings rooms and access to f&b outlets. Sheraton is revamping more than 400 existing lobbies globally, to provide ‘community tables’, tech-enabled studios and purpose-built workspaces. Some operators are considering even more radical approaches, offering rooms that can be used as workspaces by day and bedrooms by night, with clever room design and folding beds. While not yet widespread in KSA, these trends are likely to shape the Saudi hotel sector over the next decade.
F & B
F&B lies ‘front and centre’ of many of the most prominent trends shaping the Saudi retail and hospitality markets with smart mall owners and hotel operators recognizing the contribution that F&B can make to their objectives of creating a memorable experience, extending stay times and increasing customer loyalty. The following 5 trends are having an increased impact on both retail and hospitality projects.
Food Halls aim to bring local or artisanal foodservices to the market at an affordable price while increasing dwell times. They are likely to emerge as an important component in the Kingdom’s foodservice market in the next decade.
Healthy and sustainable eating. Saudi consumers are becoming increasingly concerned with health & wellness. Existing fast-food chains have responded by introducing more healthy menu options while new brands such as Sinless and Yogi are emerging with a specific focus on health and wellbeing.
3rd wave coffeeshops typically offer a range of unique or specialty coffees of higher grade than commercial coffee outlets and train their baristas to take pride in sharing the source and taste profile of each roast they prepare.
Home grown concepts. KSA has seen an increase in local F&B concepts in recent years, with local brands such as Shawarmer, Taxi Steaks & Burgers, Burger Eight, Hello Chunk, Bafarat, ByblosXpress, Pattis and Shobak successfully competing against the international giants.
Casualization of fine dining. The Saudi F&B scene is witnessing a growth in casual fine dining as the younger generation seeks quality food in lively atmosphere with a proliferation of such outlets including Nobu, Coya, Merki and Roka.
In summary, the growth of spending on food and beverages is fundamentally reshaping the Saudi retail and hospitality sectors, resulting in a convergence of previously distinct offerings, allowing for the creation of a range of new concepts and opportunities. Dining is becoming an ever more integral part of the overall shopping and hospitality experience being sought by increasingly discerning Saudi consumers.
Developers are responding to the changing dynamics of demand and the convergence of the retail and hospitality markets. The most successful projects will be those that combine new and experiential F&B concepts with opportunities for hybrid working to provide customers with a seamless experience/ journey throughout.
City Yard is a leading example of the new mixed use retail and hospitality projects that are resulting from the above trends. Combining a hotel (operated by Shirvan), with a range of restaurants and other retail outlets, City Yard is currently one of the most popular destinations in Central Jeddah, providing something of a ‘role model’ for mixed use projects elsewhere in the Kingdom.