Jabal Omar Development plans to open 10 hotel towers in the holy city in Makkah next year to accommodate Islamic pilgrims, the Saudi Arabian company’s executive general director said.

Jabal Omar is developing 2.2 million sqm (24 million sqft) of land near the Grand Mosque, Sameer Al Quraishi said in a recent phone interview. The site was designed to include 38 hotel towers and the country’s largest shopping mall, he said.

“Saudi Arabia is aiming to increase the number of people who are allowed to perform the annual pilgrimage,” Al Quraishi said. “It’s also mostly trying to accommodate more religious visitors and that will surely increase demand for hotels.”

The government’s goal to allow more pilgrims to Makkah coupled with rising wealth in Islamic countries is fuelling demand for higher-end accommodation in the holy city. More than 10 million people descend on Makkah throughout the year and about three million pilgrims attend the annual Hajj.

Marriott International, Hyatt Hotels, Blackstone Group’s Hilton Hotels and Starwood Hotels & Resorts Worldwide’s Sheraton unit will manage properties there, Al Quraishi said. The 38 hotels under construction will be managed by 28 companies and will add 13,500 rooms to Makkah’s hospitality industry when they’re completed in five years, he said.

The project is being developed in five phases at a cost of SR20 billion ($ 5.3 billion). Jabal Omar, based in Makkah, is looking at ways to finance the final two stages of development after it funded previous phases through bank and government loans in addition to a capital increase, Al Quraishi said.

“We will either issue bonds or borrow from banks, but we definitely prefer bonds,” he said. “When we complete the designs for the final two stages in about six months, we will have a clearer idea of our best financing option and the amount needed.”

Jabal Omar shares have risen 57 per cent this year. The country’s Tadawul All Share Index has gained 8.5 per cent during the same period. Saudi Arabia’s largest home developer, Dar Al Arkan Real Estate Development, has increased 28 per cent this year. Jabal Omar, which reports earnings according to the Islamic calendar, has suffered losses in the past two years, Bloomberg data shows.

“Returns won’t be immediate because we have debt to banks and the government so we have huge financial commitments right now,” Al Quraishi said. “Once we repay debt, the returns would be enormous.”

Jabal Omar said last month it signed an agreement for a SR5 billion Islamic financing with a group of local banks. The developer in December got a SR3 billion loan from the finance ministry.

The company raised SR2.5 billion from its shareholders for the project, and it has SR4.6 billion of debt due in 2049, according to data compiled by Bloomberg. The contract for construction of the Makkah project’s third phase, which includes two towers, known as Makkah Gate and a mall, will be awarded soon, he said.

About 17 companies, mostly from the UAE, are bidding for the work, he said.

The first phase of the project, which includes 10 towers, is being built by Nesma & Partners, a closely held Saudi Arabian firm. Baytur Construction and Azmeel Contracting & Construction won the contract for the second phase, which includes four towers. Designs for the fourth and five phases are being drawn and are expected to be complete in six months, Al Quraishi said. The development, about 300 metres from the Grand Mosque, will include a prayer area to host 65,000 worshipers, complete with parking spaces, Al Quraishi said.