Saudi Arabia is set to significantly expand its hotel infrastructure by 2030, with plans to introduce 320,000 new hotel rooms throughout the nation. This development is designed to support an expected annual influx of 150 million tourists, both domestic and international. This information is according to a recent report from global property consultancy Knight Frank.
Currently, the travel and tourism sector contributes almost 6% to the Saudi GDP. This sector is vital to the Saudi government's ambitious plans to increase that figure to 10% by the year 2030.
The report by Knight Frank comes following a record-breaking year for Saudi Arabia in terms of visitor numbers. In 2022, the Kingdom welcomed an unprecedented number of guests. During the first half of 2023, tourism expenditures soared to $23.2 billion (approximately SAR 87 billion), which marks a 132% increase from the previous year. During the same period, Saudi Arabia saw 14.6 million international visitors, representing a 142% year-on-year increase. This period was the most successful half-year in the history of Saudi Arabia's tourism sector.
The majority of these visitors originated from neighboring Gulf countries, with Bahrain, Kuwait, and Egypt leading as the primary sources of international tourists. However, Saudi Arabia is also aiming to attract more visitors from further afield.
Turab Saleem, a partner and the head of hospitality, tourism, and leisure advisory at Knight Frank Middle East, noted that the Kingdom is targeting 150 million visitors by 2030, which is a 50% increase from earlier targets. The government's strategies include enhancing cultural and entertainment offerings nationwide, alongside existing attractions like the Jeddah F1 Grand Prix and various Entertainment Seasons.
Upcoming entertainment projects include theme parks such as Boulevard World in Riyadh, adding to the two dozen parks already licensed by the Saudi General Entertainment Authority over the past year. Additionally, Riyadh's successful bid to host the World Expo 2030 is expected to attract 40 million visitors during the six-month event, potentially injecting $94.6 billion into the Saudi economy, as estimated by local investment bank Rajhi Capital.
The anticipated boom in the hospitality sector emphasizes the need for suitable accommodation for hotel staff. According to Knight Frank’s projections, 67% of the new hotel rooms will be classified as “upscale” or “luxury” (4 and 5-star), typically requiring one to two staff members per room. This suggests that between 232,000 and 387,000 key tourism workers will require housing as the sector expands.
Marriott is expected to surpass Accor as the largest hotel operator in Saudi Arabia by 2030, with 26,200 rooms under management compared to Accor's 25,400.
Faisal Durrani, Partner and Head of Research at Knight Frank Middle East, emphasized the importance of quality housing for hospitality staff to the success of Saudi Arabia’s tourism goals. He noted that appropriate worker accommodation not only aids in attracting and retaining employees but can also provide investors with yields around 10% depending on location and tenant quality.
The analysis by Knight Frank also focused on the hotel supply pipeline in the holy cities of Mecca and Medina, which are expected to host an estimated 221,000 new hotel rooms. Projects like Masar Mecca and Thakher Development are set to contribute significantly to this number.
Daniel Pugh, Partner and Head of Hospitality Valuation & Advisory at Knight Frank Middle East, highlighted the financial scale of these projects. Approximately $104 billion will be needed for construction costs to develop 320,000 hotel rooms across the country, with $70 billion allocated for Mecca and Medina alone.
This substantial expansion in the hospitality sector is intended to accommodate the millions of religious pilgrims expected to visit these holy cities, with annual numbers projected to rise to 50 million by 2030, reinforcing Saudi Arabia’s position as a global hub for religious tourism.
Comments