Saudi Arabia’s Emerging Cities Provide Unique Opportunities in Hotel Industry

Saudi Arabia’s rapid growth in the global tourism sector, driven by major development projects, creates unique investment opportunities, especially in emerging cities. The country is expected to command 58% of the Middle East and North Africa (MENA) hotel supply by 2028, according to a report by JLL.

Saudi Arabia’s Growth in Tourism

The tourism industry in Saudi Arabia is growing at a rapid pace, outperforming other regions globally. The Kingdom’s Compound Annual Growth Rate (CAGR) in hotel supply growth has been reported at 4% annually from 2019 to 2024, a pace that is expected to continue till 2028. Major development projects within the country are driving this progress, as Saudi Arabia is quickly emerging as the premier tourism destination in the MENA region. Approximately 160,000 quality hotel rooms are in operation, with an additional 106,000 in the pipeline, positioning the country to become the region’s largest tourism destination by 2028.

Revenue Per Available Room Growth

With Saudi Arabia at the forefront, the MENA region has experienced the most substantial Revenue Per Available Room (RevPAR) growth globally since 2019. The Kingdom’s strategic infrastructure investments and Vision 2030 have contributed significantly to this success. Saudi Arabia’s National Tourism Strategy, launched in 2016, has already surpassed its initial goals, with the tourism sector’s GDP contribution reaching 11.5% in 2023, exceeding the 2030 target of 10%.

Emerging Investment Opportunities

Saudi Arabia’s emerging cities, such as Taif and Al Ahsa, offer unique opportunities for investors. These cities, rich in cultural heritage and untapped potential, attract 23% of overall visitor numbers, translating to approximately 20 million visitors annually. However, quality hotel supply in these cities remains limited, accounting for only 25-30% of the total, creating a significant gap for investors to capitalize on.

Government Support for Investment

Supportive government initiatives enhance the investment landscape in these emerging cities. The Tourism Development Fund and the Ministry of Tourism’s Investment Incentives Program provide additional backing for investors willing to enter these emerging markets.

Investors looking for high-growth opportunities in Saudi Arabia’s hospitality sector should consider the untapped potential of tier two cities like Taif and Ahsa. These markets offer a rare combination of growing demand and limited quality supply, creating an environment ripe for significant returns. To maximize potential in Saudi Arabia’s booming hospitality sector, a diversified portfolio that includes both tier 1 and tier 2 locations is suggested.

The opportunity for early movers in Saudi Arabia’s tier 2 cities represents a unique chance to participate in this transformative growth. With the right approach and strategic investments, investors can position themselves at the forefront of one of the world’s most dynamic and rapidly expanding hospitality markets.

Download the JLL Unlocking the investment potential in Saudi Arabia’s hotel industry report.