Saudi Arabia’s hospitality sector set to outpace global growth with 4% CAGR, fuelling significant investment opportunities: JLL

Saudi Arabia’s hospitality sector is poised for significant expansion, fuelled by Vision 2030 and strategic tourism infrastructure investments, according to JLL’s latest report titled Unlocking the Investment Potential in Saudi Arabia’s Hotel Industry. The report highlights the growing investment opportunities for both regional and international investors as ambitious tourism development plans get underway in the Kingdom.

While the global hotel supply has seen varied growth post-COVID, the MENA region has demonstrated resilience, maintaining a strong momentum at 3% CAGR from 2019-2024. Looking ahead, the MENA region’s projected 4% CAGR from 2024 to 2028 significantly outperforms the Americas (2%), Europe (1%), and Asia-Pacific (1%). This growth is largely driven by major development projects in Saudi Arabia, which is rapidly expanding its tourism infrastructure. With approximately 160,000 quality hotel rooms currently in operation and an additional 106,000 in the pipeline, Saudi Arabia is expected to account for 58% of the total hotel supply in the MENA region by 2028, significantly increasing its hospitality capacity to meet the rising visitor numbers.

Saudi Arabia’s progress in transforming its tourism industry, driven by Vision 2030 and strategic infrastructure investments, has resulted in substantial growth of the Kingdom’s hospitality sector. KSA’s National Tourism Strategy, launched in 2016, has already surpassed its initial goals, with tourism’s GDP contribution reaching 11.5% in 2023, exceeding the 2030 target of 10%, demonstrating the effectiveness of the Kingdom’s strategic initiatives.

Since 2019, the MENA region has experienced the most substantial Revenue Per Available Room (RevPAR) growth globally (+28%), outpacing Europe (+25%), the Americas (+18%), and Asia Pacific (-12%). Saudi Arabia’s RevPAR has increased 9% annually since 2019, driving interest primarily from regional investors to date. Notably, international visitation growth is outpacing domestic at 14.4% to 13.7% since the launch of the tourist visa in 2019, with key cities like Riyadh and Madinah even outperforming established global tourism destinations.

RevPAR in Select Global Cities (USD)

Saud Al Sulaimani, Country Head of JLL KSA, said: “Saudi Arabia’s commitment to developing its tourism sector, coupled with its strategic investments and ambitious vision, is setting the country up to be a global leader in the hospitality industry. It has seen unprecedented hotel supply growth with Revenue Per Available Room in its major cities competing and often outperforming established hub and tourism centric cities across the world.

However, this report looks to show that this is just one segment of market opportunity available to global investors. The report highlights that Saudi Arabia’s emerging destinations, for example, Taif and Al Ahsa, represent a new frontier for hospitality investment, offering a unique opportunity for first movers in these underserved markets. These promising cities, rich in cultural heritage and untapped potential, attract 23% of overall visitor numbers, translating to approximately 20 million visitors annually. However, quality supply in these cities remains limited, accounting for only 25-30% of the total, creating a significant gap for investors to capitalise on.“

Amr El Nady, Head of Hotels & Hospitality MEA and Managing Director, Global Hotel Desk, added: “The numbers speak for themselves: since the launch of the tourist visa, international visitation has been growing faster than domestic. This, coupled with enhanced global connectivity through new airport developments and expanded routes, demonstrates that the country is building a strong foundation for sustained and accelerated growth, even before its transformational projects fully materialise.”

JLL’s Hotels & Hospitality Group has completed more transactions than any other hotels and hospitality real estate advisor over the last five years, totaling US$83 billion worldwide. The group’s 370-strong global team in over 20 countries also closed more than 7,350 advisory, valuation and asset management assignments. JLL’s hotel valuation, brokerage, asset management and consultancy services have helped more hotel investors, owners and operators achieve high returns on their assets than any other real estate advisor in the world.