Saudi Arabia Hospitality Market Analysis 2025
- Alketa Kerxhaliu
- 5 days ago
- 34 min read
Introduction
Saudi Arabia’s hotel industry is undergoing a remarkable transformation as the Kingdom pursues its Vision 2030 ambitions. Boosted by record visitor volumes and government investment, the hospitality market has rebounded strongly from the pandemic and is now reaching new heights. Total tourist trips (domestic and international) hit 115.9 million in 2024, an all-time high that exceeded the initial target of 100 million. Travel and tourism are on track to contribute over 10% of Saudi Arabia’s GDP by 2025, reflecting unprecedented growth in both religious and leisure travel. At the same time, Saudi Arabia leads the Middle East in hotel development with tens of thousands of new rooms planned across the country. This report provides a detailed analysis of current market performance and development trends, with a focus on key submarkets (Riyadh, Jeddah, Makkah, and NEOM) and the factors driving demand. It also examines the investment climate – including recent transactions and financing conditions – and highlights development opportunities in the context of major infrastructure projects. The goal is to equip developers, investors, and lenders with a comprehensive understanding of Saudi Arabia’s hospitality sector in 2025.
National Market Performance Overview
Robust Recovery and Growth: Saudi Arabia’s hotel sector has rebounded strongly from the pandemic slump and is now performing above pre-2020 levels. Nationally, occupancy over the past 12 months is hovering around 60–62%, up from below 40% at the height of 2020. Average daily rate (ADR) has also surged – currently about $185–$190 USD (approximately SAR 700) – reflecting a mix of high-end new supply and pricing power during peak travel periods. For context, in the first half of 2025 the nationwide ADR reached SAR 822 (~$219), a 1.9% year-on-year increase, while occupancy averaged 62.3%. Revenue per available room (RevPAR) is now roughly $115–$120, a dramatic improvement from the lows of 2020 and roughly 20% higher than the 2019 pre-pandemic average. These metrics illustrate a full recovery by 2023 – when RevPAR growth hit almost 25% – followed by a slight normalization in 2024 as the initial wave of post-pandemic demand leveled off. Overall, Saudi Arabia’s hotels are achieving record nominal revenues, supported by both higher volumes of guests and higher rates.
Supply and Demand Dynamics: The rapid demand recovery has outpaced new supply in recent years, driving the rise in occupancy. In 2022 and 2023, occupied room nights jumped by 47% and 13% respectively (as pilgrim visas and general tourism fully reopened), far exceeding the ~5% annual supply growth over the same period. By 2023, demand (hotel room nights sold) reached 37.3 million, surpassing pre-COVID levels, while supply (room nights available) was about 59.8 million. This pushed national occupancy to 62.4% in 2023, up from ~59% in 2019. In 2024, the market saw a slight dip in occupancy to ~61% as supply growth (about +2.3%) outstripped a plateauing in demand (which was essentially flat at -0.1%). The Year-to-date 2025 trend shows demand rising modestly (+0.8%) while supply actually contracted slightly (-0.6% YTD), in part due to hotel closures and redevelopment in some markets – a dynamic noted by STR (CoStar) data. This has kept occupancy stable to slightly up in 2025. The overall picture is of a high-growth market that absorbed a wave of new rooms post-2020 and is now entering a new expansion phase fueled by forthcoming mega-projects and events.
Pipeline and New Supply: Saudi Arabia’s hotel development pipeline is enormous, underpinned by government-led investment and entry of international operators. According to MMCG’s proprietary database, there are ~45,000 hotel rooms under construction, equivalent to about 26% of existing stock (177 projects as of late 2025). In total (including projects in planning), Saudi Arabia has over 92,000 rooms in the pipeline, the largest pipeline in the Middle East. This pipeline is heavily skewed toward upscale and luxury developments – nearly 90% of upcoming rooms are in the Upscale, Upper Upscale or Luxury segments per MMCG data. The concentration reflects the Kingdom’s push for high-quality offerings to attract international tourists. Notably, Makkah is set to receive the largest share of new rooms by 2030 (given the huge expansions around the Holy Mosque), while Riyadh and Jeddah also have robust pipelines. As of mid-2025, Riyadh alone had 18,152 rooms in development (across 88 projects) and Jeddah had 12,627 rooms in the pipeline. To put the boom in perspective, Saudi officials announced plans to add 362,000 hotel rooms by 2030 (a doubling of current supply) as part of a $110 billion investment drive. This extraordinary expansion – aimed at supporting events like Expo 2030 Riyadh and a potential 2034 FIFA World Cup – will require careful phasing to avoid short-term oversupply, but in the long run it aligns with the targeted surge in visitation.
Key Market Metrics (National vs Major Cities)
To appreciate performance variations, Table 1 compares key metrics nationally and in three major markets. All figures are for the last 12 months (as of Q3/Q4 2025) based on MMCG data:
Table 1: Key performance indicators for the national market and top cities (MMCG hospitality database). ADR and RevPAR are in U.S. dollars. YoY changes indicate Q3 2025 vs Q3 2024 percentage-point (pp) or percent changes.
The table highlights that Riyadh and Jeddah have seen some softening in 2024/25 (declines in both occupancy and ADR), whereas Makkah’s metrics have improved (RevPAR up over 3% on higher rates) as religious tourism rebounds. National averages were roughly flat year-on-year, masking the divergence beneath. In the following section, we delve deeper into each key submarket.
Submarket Analysis: Riyadh, Jeddah, Makkah, and NEOM
Riyadh – Business Hub with Surging Supply
Riyadh, the capital, is Saudi Arabia’s primary business travel market and a focal point of new development. Performance: After an exceptional 2022–2023, Riyadh’s hotel performance has tempered somewhat. Occupancy in the past 12 months averages ~62%, down slightly (~2 points) from last year, and ADR is around $225 (SAR ~845), down ~3–4%. This pulled RevPAR down about 5.5% year-on-year – the steepest decline among major markets. The dip is largely due to an influx of new upscale supply and a normalization of demand after 2023’s peak (which included a post-COVID surge and Saudi-hosted events). Even so, Riyadh’s absolute ADR remains the highest in the country – reflecting its position as a government and corporate center with strong weekday demand and frequent conferences. Development Pipeline: Riyadh is undergoing a hotel building boom. In H1 2025 alone, the city added ~690 new hotel rooms, bringing its inventory to about 49,100 keys. Another ~1,000 rooms are slated to open in late 2025. As of late 2025, 42 projects (8,346 rooms) were under construction in Riyadh, equal to one-third of existing supply. Notable openings on the horizon include several luxury flags in the King Abdullah Financial District and the Diplomatic Quarter. Interestingly, new developments are increasingly spread across emerging districts (away from the traditional Olaya/King Fahad Road corridor), indicating confidence in wider demand generators (e.g. the planned “New Murabba” downtown and entertainment zones). Outlook and Investment: Riyadh’s demand profile is expanding beyond government business, with initiatives to boost leisure tourism (e.g. Riyadh Season festivals, sports events, and upcoming mega-events like Expo 2030). In the near term, however, the supply surge is outpacing demand growth, which could suppress occupancy or rates. Investors are still bullish on Riyadh’s long-term prospects – evidenced by deals like the Mövenpick Hotel & Residences Riyadh sale for ~SAR 1 billion in 2024 (a local fund acquisition, underscoring strong domestic investor appetite). Underwriting in Riyadh will need to factor in longer absorption periods for new hotels; however, the city’s role as a financial hub and host of global events suggests robust growth potential through 2030.
Jeddah – Gateway Port Balancing Leisure and Business
Jeddah, the Kingdom’s second-largest city and Red Sea port, serves both commercial travelers and leisure visitors (especially during summer and for pilgrim transit). Performance: Jeddah’s hotel market has seen mixed results. Current occupancy is roughly 63%, which is relatively healthy and slightly up versus early 2024. However, ADR has fallen sharply – averaging ~$170 now, down about 7–9% from last year. This reflects increased competition and perhaps some price sensitivity in the leisure segment. Consequently, RevPAR in Jeddah is down nearly 10% year-on-year (the weakest performance among major markets). JLL’s data for H1 2025 showed a similar trend: occupancy rose 1.9 points but ADR fell 7.1%, as Jeddah hotels tried to stimulate demand. Demand drivers in Jeddah include domestic holidaymakers, regional business trade, and events like the annual Jeddah Season cultural festival and Formula 1 Grand Prix, which have helped fill rooms on occasion. But seasonality remains an issue (with quieter periods in off-peak months). Development Pipeline: Jeddah’s hotel supply is expanding steadily. The city added ~750 keys in H1 2025 (inventory now ~18,800) and expects ~1,300 more by year-end. According to MMCG data, Jeddah has 5,464 rooms under construction (across 30 projects), equal to a whopping 34.7% of its current inventory. This pipeline, one of the highest relative expansions in the country, includes numerous upscale resorts and serviced apartments along Jeddah’s corniche and the New Jeddah Downtown development. Investor Interest: Jeddah’s strategic location and improving entertainment offerings make it attractive, but investors are mindful of the recent performance dip. There is notable interest in waterfront developments and branded resorts that target growing leisure demand from Saudis and Gulf travelers. At the same time, midscale hotels near the airport and city center present opportunities as religious transit traffic (Umrah pilgrims) picks up. Going forward, Jeddah’s hospitality fortunes are expected to improve with major projects like the Jeddah Central redevelopment and expanded cruise tourism through its port. Still, underwriting should account for Jeddah’s historically lumpy demand – balancing high-demand periods (festivals, Hajj transit) against quieter stretches – and the fact that new supply may require aggressive marketing and differentiation to maintain rates.
Makkah – Religious Tourism Powerhouse
Makkah (Mecca) is the spiritual heart of the Muslim world and Saudi Arabia’s largest hotel market by far. The holy city’s hospitality sector revolves around religious pilgrimage: the annual Hajj and year-round Umrah visits. Performance: After the severe pandemic impact (when Hajj was curtailed), Makkah’s hotel performance has rebounded to strong levels. Occupancy is approximately 61–62% over the past year. While that may seem modest, it’s important to note the massive volume of rooms in Makkah and the highly seasonal nature of demand (hotels run near full capacity during peak pilgrimage periods and much lower in off-season). ADR averages about $186 (SAR ~700), and notably grew by ~4% in the last year even as occupancy was flat. Many hotels have been able to push rates, especially for the premium rooms with Kaaba views, given the surge in pilgrim numbers and limited supply during peak days. The net effect is RevPAR rising around +3.2% year-on-year. Supporting this, H1 2025 data showed Makkah with a 7.1% ADR increase and RevPAR up 3.1%, despite a slight dip in occupancy. Scale of Market: Makkah’s hotel room supply is enormous – by some estimates over 150,000 keys (including everything from 5-star towers to simple guesthouses). MMCG’s database, focusing on major hotels, counts ~65,000 rooms in Makkah’s inventory, which still represents about 38% of all hotel rooms in Saudi Arabia. This unparalleled scale means Makkah alone generates a huge share of nationwide room nights and revenues. For example, industry reports indicated hotel room revenues in Makkah/Madinah were a major contributor to the SAR 444 billion tourism GDP in 2023. Demand Drivers: The Kingdom’s policies are squarely aimed at expanding religious tourism. Vision 2030 targets increasing Umrah pilgrims to 30 million annually by 2030 (from roughly 19 million in 2019), and Hajj capacity to over 3 million per year. In 2024, as COVID restrictions faded, inbound religious visitation soared – Saudi Arabia welcomed 7.7 million foreign Umrah pilgrims in just the first half of the year. This translated into very strong demand for Makkah hotels, especially those closest to the Grand Mosque. Development Pipeline: To accommodate growth, Makkah is undergoing vast development. There are 16 hotel projects (13,400 rooms) under construction in Makkah currently – sizable in absolute terms (the largest of any city) but relatively moderate as a percentage (+20.7% on current supply). Many of these projects are mega-developments by public or quasi-public entities, such as the Jabal Omar expansion (multiple towers near the Haram) and the government-backed Masar Makkah project. Moreover, 221,000 new hotel rooms are planned in Makkah and Medina by 2030 per Vision 2030 programs, indicating how crucial the holy cities are to the tourism strategy. Investors remain highly interested in Makkah due to guaranteed demand; however, the market has unique characteristics. Occupancy and ADR can swing dramatically between peak and off-peak seasons, and many properties derive the bulk of their profit during Ramadan and Hajj periods. Underwriting Makkah assets therefore involves analyzing effective annual occupancy (blending high and low seasons) and understanding the government’s evolving regulations (e.g. pilgrim visa quotas, infrastructure upgrades like the Haramain high-speed rail). Overall, Makkah offers high-reward opportunities – a successful hotel can generate very strong cash flows – but also requires prudent planning for seasonality and intense competition in the immediate vicinity of the Holy Mosque.
NEOM – The Giga-Project Frontier
NEOM represents an entirely new “submarket” on the Kingdom’s northwest Red Sea coast, born from Saudi Arabia’s giga-project initiative. Envisioned as a high-tech, futurist region 33 times the size of New York City, NEOM aims to attract both residents and tourists to its various components (which include the linear smart city “The Line”, the mountain resort Trojena, the coastal industrial city Oxagon, and luxury islands like Sindalah). Current Status: As of 2025, NEOM is still in development phase, but it is starting to open its first destinations. Notably, Sindalah Island, a luxury yachting resort in NEOM, welcomed its first guests in late 2024. Sindalah will feature high-end beach clubs, marinas, and several ultra-luxury hotels (Marriott has signed three properties there, expected to open by 2024–2025). Similarly, Trojena (the site of the 2029 Asian Winter Games) has two luxury hotels under construction (e.g. a 236-room W Hotel) with openings slated by 2026. Pipeline and Scale: Given that NEOM is essentially being built from scratch, the hotel pipeline is massive – though spread over a longer horizon. In the near term (next 2–3 years), only a handful of resorts will be operational (Sindalah’s initial hotels, a couple in Trojena, and possibly staff accommodations). By 2030, however, NEOM’s leadership targets around 5 million visitors annually. To serve this, at least 20–30 hotels are planned across the various NEOM regions. For instance, the “Magna” urban sector of NEOM alone is slated to have 15 luxury hotels with 1,600 rooms in early phases. We can expect several tens of thousands of rooms in NEOM by the 2030s, although exact numbers are evolving. Importantly, NEOM’s projects often blur the line between hotels and residences – many developments will include serviced apartments, villas, and extended-stay units targeting permanent or semi-permanent residents of NEOM. Investor Interest: NEOM’s hospitality opportunities are high-profile and largely backed by the Public Investment Fund (PIF) and strategic partners. International hotel operators are eager to plant their flag in NEOM due to its global marketing pull – announcements have come from Hilton, Four Seasons, Marriott, Accor, IHG, and others for NEOM sites. That said, for private investors and lenders, NEOM carries unique risks: the region’s success depends on completing vast infrastructure (new airports, utilities, etc.) and actually attracting population and corporate activity to this remote area. In essence, NEOM is a long-term play. Near-term performance metrics are less relevant (there is no historical occupancy to analyze yet); instead, feasibility rests on projections of future tourism flows. The Saudi government is heavily incentivizing NEOM’s success, offering tax breaks and a special regulatory zone, which mitigates some risk. From an underwriting perspective, any NEOM hotel development must assume a multi-year ramp-up and the creation of demand drivers from scratch. However, given the ambition – e.g. NEOM will host the 2029 Winter Games and likely other global events – the upside could be substantial. In summary, NEOM is not a traditional submarket but rather the flagship of Saudi Arabia’s tourism future, with investors viewing it as a high-risk, high-reward frontier.
Demand Drivers in Saudi Hospitality
Multiple engines are propelling demand growth for Saudi Arabia’s hotels. The following are the primary demand drivers, each underpinned by government initiatives:
Religious Tourism (Hajj & Umrah): Faith-based travel to the holy cities of Makkah and Madinah is the bedrock of Saudi’s tourism sector. In a normal year pre-pandemic, over 19 million Umrah pilgrimages were performed (7.4 million by international visitors), alongside ~2.5 million Hajj pilgrims. These figures dropped drastically in 2020–2021, but Saudi Arabia has restored pilgrimage quotas and is now expanding capacity. Vision 2030’s Pilgrim Experience Program aims to host 30 million Umrah pilgrims annually by 2030 and over 3 million Hajj pilgrims. This is facilitated by infrastructure such as the Haramain High-Speed Railway (connecting Jeddah’s airport to Makkah and Madinah) and ongoing expansions of the Holy Mosques. Religious tourism yields consistent baseline demand for thousands of hotel rooms, especially in Makkah/Madinah. Peak periods (Ramadan, Hajj season) see virtually 100% occupancy in those cities, spilling over to Jeddah and Taif. As the Kingdom simplifies visas and improves the pilgrim experience, the volume of religious travelers – and their length of stay and spending – is set to grow significantly, directly benefiting the hospitality sector.
Business Travel and Mega-Events: Corporate travel to Saudi Arabia is climbing as the country diversifies its economy and hosts high-profile events. Riyadh, in particular, is emerging as a regional business hub – spurred by the government’s mandate for multinational companies to establish regional headquarters in the Kingdom. Conferences and summits (the Future Investment Initiative, LEAP tech conference, etc.) draw thousands of international delegates. Saudi Arabia is also securing global events that drive travel: e.g. World Expo 2030 in Riyadh, the 2034 FIFA World Cup, the 2029 Asian Winter Games in NEOM, and possibly an Olympics bid in the future. Even before those, recurring events like the Formula One Grand Prix in Jeddah, Dakar Rally, boxing and WWE matches in Riyadh, and golf tournaments are putting Saudi on the map. These events generate spikes in hotel demand and raise the country’s profile as a destination. More routine business travel is also rising, tied to sectors like oil & gas (e.g. Aramco’s activities in the Eastern Province), finance (growing banking and fintech in Riyadh), and construction/engineering (with so many projects underway). Under Vision 2030, Saudi aims to increase tourism’s GDP contribution from 3% to 10% by 2030, which implicitly relies on boosting business visitation alongside leisure. The launch of new carriers like Riyadh Air (the Kingdom’s planned second flagship airline) in 2025 will further improve connectivity and corporate travel options.
Giga-Projects and New Leisure Destinations: A cornerstone of Saudi Arabia’s strategy is developing entirely new destinations to attract tourists. These include NEOM (discussed above), Red Sea Global’s projects, and a host of others:
Red Sea & AMAALA: On the Red Sea coast, Red Sea Global (a PIF company) is creating a luxury sustainable tourism destination. The first phase involves 16 resorts across natural islands and desert landscapes. The Red Sea Project opened its first resort in 2023, and additional resorts are rolling out through 2024–2025. Nearby, AMAALA will cater to wellness and ultra-luxury travelers. These resorts, once fully online, will add thousands of beachfront ultra-high-end rooms, targeting upscale international markets (with promises of pristine nature, coral reefs, and exclusivity).
Entertainment Mega-Developments: Qiddiya, near Riyadh, is a huge entertainment city under construction (with theme parks, motor sports facilities, golf courses, etc.) aiming to become a multi-day family destination for domestic and regional tourists. Diriyah Gate in Riyadh is transforming a historic UNESCO site into a culture and lifestyle district featuring several luxury hotels (e.g. Aman, Baccarat, Ritz-Carlton Reserve) and museums. AlUla, an ancient Nabatean heritage site, is being developed with boutique hotels and glamping sites to draw cultural tourists. Soudah Peaks in Asir region will develop mountain resorts for nature and adventure tourism. Each of these projects creates new reasons for travelers to visit Saudi Arabia beyond the traditional holy sites or business hubs. They are also geographically diverse, fostering tourism in various provinces.
Cruise Tourism & Sports: The government is also nurturing niche segments like cruise tourism (new cruise terminals in Jeddah and along the Red Sea to include Saudi in regional cruise itineraries) and sports tourism (Saudi clubs and events attracting fans – e.g. the Saudi Pro League’s star footballers bringing international spectators). All these contribute to leisure demand that fills hotels across seasons.
Domestic Leisure Travel: Saudi domestic tourism has surged as entertainment options multiply and social changes take hold. Historically, many Saudis traveled abroad for vacations, but now there are more reasons to vacation at home. Government data shows 86.2 million domestic tourist trips in 2024, a 5% increase over the prior year. Attractions like “Riyadh Season” (a winter entertainment festival with concerts, carnivals, and dining) attracted over 15 million attendees in 2022 and similar numbers in 2023, many of whom travel from other parts of the country to the capital. Other seasonal events in Jeddah, Eastern Province (e.g. Sharqiah Season), and AlUla are boosting internal travel. Additionally, the removal of the ban on cinemas and promotion of cultural events mean Saudis are exploring their own cities more. The rise of domestic low-cost airlines has improved connectivity between regions, making weekend trips feasible. For the hotel market, domestic travelers tend to bolster occupancy on weekends and during summer months, offsetting the patterns of business travelers. Notably, domestic family tourism is driving demand for serviced apartments and mid-market resorts, a segment with room for growth. The government’s goal of fostering domestic tourism (with targets like 55 million domestic trips by 2030) is not just to keep spending internal, but also to sustain hotel demand year-round. Local travelers’ preferences (large family rooms, villas, entertainment on-site, etc.) are influencing new hotel developments and represent a stable demand base less exposed to global shocks.
Government Initiatives and Vision 2030 Reforms: Overarching all the above drivers are the structural reforms and investments led by the Saudi government. Visa liberalization has been a game-changer – since 2019, the introduction of tourist e-visas and the opening up of the Kingdom to non-religious tourism have unlocked a huge new visitor segment. By 2022, Saudi Arabia became one of the world’s top 13 countries in international tourism receipts, reflecting this newfound openness. Additionally, the government has created institutions like the Tourism Development Fund (TDF) to provide soft financing for hotel projects, and launched promotional arms like Visit Saudi for marketing. Massive public investment via the Public Investment Fund (PIF) is de-risking many projects (e.g. PIF is the driving force behind NEOM, Red Sea Global, Diriyah, Qiddiya, etc., often partnering with private players for execution). There are also supportive policies such as tax incentives in Special Economic Zones, upgrades to tourist infrastructure (airports, roads, public transport), and training programs to build hospitality sector skills among Saudis. The Vision 2030 strategy explicitly aims to raise tourism employment to 1.6 million jobs by 2030 and increase tourism’s GDP contribution to 10% (from 3% in 2016). Progress is evident – by 2023 the sector’s direct + indirect GDP contribution was already SAR 444 billion (11.5% of GDP), and tourism revenues hit a record $36 billion in 2023. For investors, these initiatives mean the government is a partner in the growth of hospitality, providing confidence that demand will materialize. However, it also means that the market’s trajectory is closely tied to state-led projects and funding, which requires staying attuned to policy developments and public sector timelines.
In summary, Saudi Arabia’s hotel demand is being fueled by a unique combination of religious fervor, business momentum, visionary mega-projects, rising local tourism, and heavy government backing. This multi-pronged demand base is relatively unique – few markets globally have such strong fundamental drivers across disparate segments. It bodes well for sustained growth, although each driver comes with its own cyclicality and sensitivities (e.g. reliance on certain source markets or successful delivery of projects).
5-Year Outlook: Supply & Demand Trends
Looking ahead to the next five years, Saudi Arabia’s hospitality market is poised for continued rapid growth – albeit with some imbalances to navigate. Demand Forecasts: Both internal projections and external forecasts show Saudi tourism expanding at an exceptional rate. The World Travel & Tourism Council (WTTC) projects that Saudi Arabia will continue to “surge ahead” of peers, with Travel & Tourism GDP expected to reach SAR 447 billion in 2025 (over 10% of the economy). By 2030, the Kingdom targets 150 million total visitors annually, including around 70 million international tourists. This implies roughly a doubling of visitation from 2024 levels. Key source markets for international growth will include Muslim-majority countries (for pilgrimages), but also new markets in Europe, Asia and the Americas as leisure tourism offerings come on line. The China market, in particular, is one Saudi is courting aggressively (e.g. recent marketing tie-ups with Chinese tour operators), given China’s large outbound travel potential. On the domestic side, population growth and higher disposable incomes (assuming oil revenues remain robust and economic diversification continues) should drive more local trip volumes. The Saudi tourism ministry has also been improving data collection and marketing, which should help sustain growth. One caveat: these bullish demand forecasts depend on global travel trends remaining favorable (e.g. no severe pandemics, geopolitical shocks, or oil slumps that curtail travel). They also presume that mega-events like Expo 2030 and World Cup 2034 proceed as planned, providing significant one-off boosts in those years.
On the supply side, the hotel opening pipeline will accelerate in the latter half of this decade. Industry tracking indicates that by 2025–2027, new hotel opening rates will reach ~20,000+ rooms per year across the country. Specifically, Lodging Econometrics forecasts 103 new hotels (23,600 rooms) to open by end of 2025 (this includes the tail end of current under-construction projects), followed by a similar pace in 2026 and 2027. These numbers may even trend higher into 2028–2030 as the giga-project hotels come to fruition. The geographical distribution of new supply over the next 5 years will be telling:
Makkah and Madinah: Expect a wave of new openings in 2025–2026 timed with expanded pilgrim quotas. By 2026, Makkah will likely see >5,000 new keys delivered (many part of large mixed-use complexes adjoining the Holy Mosque). Madinah, while a smaller market, also has significant expansion (the Rua Al Madinah project will add dozens of hotels near the Prophet’s Mosque). There is a risk of short-term oversupply in these cities if pilgrim growth is more gradual, but given the Vision 2030 push, the demand should catch up quickly – especially for mid-market accommodations which are needed for a wider range of pilgrim budgets.
Riyadh: The capital’s supply growth will remain aggressive. After ~50,000 keys by 2025, Riyadh might exceed 60,000 hotel rooms by 2027, as new mega-developments in the city (like King Salman Park, Qiddiya resorts, Diplomatic Quarter hotels, etc.) come on stream. The Kingdom’s plan to host Expo 2030 in Riyadh means a lot of hotel capacity must be ready by late 2029. Indeed, PIF has launched a dedicated company to ensure infrastructure (including lodging) for Expo is delivered. We anticipate hundreds of smaller hotels or serviced apartments will also pop up in Riyadh in the lead-up to Expo, driven by private investors hoping to capitalize on the influx. After the Expo, some demand backfill will be needed – possibly through converting some of that inventory to residential or other uses if it overshoots typical demand.
Jeddah & Western Region: Jeddah’s pipeline is strong through 2025–2026 (as noted earlier). Further out, attention will shift down the coast as NEOM and Red Sea resorts ramp up. By 2027, a number of Red Sea Phase 1 resorts will have been operating for a couple of years, building an international reputation. NEOM’s The Line may partially open by 2030 (bringing business and conference visitors), while its Sindalah and Trojena components will be established luxury niches. The western region will thus see a broad diversification: from religious tourism in the Holy Cities to beach luxury at Red Sea, to eco/heritage tourism at AlUla, to urban tourism in Jeddah. This diversity is positive for overall demand but could create a fragmented market – each sub-destination must find its segment. Connectivity improvements like the planned NEOM International Airport (under construction) and expansion of Jeddah’s King Abdulaziz International Airport will be critical to support this.
Secondary Cities: Outside the big four markets, many secondary cities (Dammam/Al Khobar, Abha, Taif, etc.) will also see new hotels, albeit on a smaller scale. Notably, Dammam/Al Khobar in the Eastern Province have a pipeline of mid-scale hotels aligning with the growth of that region’s industries and leisure (beachfront development). Abha (in the southern highlands) is targeted by the Soudah Peaks project for mountain resort tourism. Taif could gain importance as a summer retreat and overflow for Makkah. Collectively, the “Regional” submarkets have the highest relative pipeline (nearly 39% of current inventory under construction), which includes these emerging destinations. The success of these will depend on domestic tourism promotion and niche appeal (e.g., cooler climate in mountains, coastal recreation, etc.).
Balancing Act: The big question for the next 5 years is: can demand growth keep pace with supply growth? Saudi Arabia’s strategy deliberately front-loads supply (build it and they will come). There likely will be periods and places where new hotels open and struggle to achieve high occupancy immediately. For instance, Riyadh’s upscale segment is already seeing rate competition; this could intensify as more five-star brands enter. Similarly, some Red Sea resorts might operate at low occupancy initially as the destination builds awareness. Market-wide occupancy may therefore fluctuate around the 60% mark rather than rising dramatically, even as visitor numbers climb – simply because the capacity is expanding in tandem. We may witness a slight dip in average occupancy by the late 2020s if supply overshoots in the short term (a possibility flagged by some analysts). However, from an investor perspective, these new rooms are strategically placed for future demand. By early 2030s, if Saudi Arabia even approaches its 150 million visitor goal, hotel performance could tighten considerably, and today’s investments would pay off with strong returns.
External Factors and Economic Context: It’s worth noting the macroeconomic backdrop. The Saudi economy is projected to grow healthily (IMF forecasts ~3–3.5% annual GDP growth for 2024–2025), supported by high oil revenues and burgeoning non-oil sectors. Inflation is moderate, and the Saudi riyal’s peg to the USD provides stability for international investors. Government finances are robust, enabling continuous infrastructure spending. One potential headwind is the global interest rate environment – higher financing costs worldwide may slightly slow hotel investment or increase required returns. Lenders will be scrutinizing project feasibility more strictly if borrowing costs remain elevated. So far, Saudi authorities have mitigated this by providing low-cost capital (through PIF and TDF), but private developers could face tighter underwriting from banks on purely commercial terms. Another factor is competition in the region: neighboring countries like UAE and Qatar are also expanding tourism offerings. Saudi Arabia will need to differentiate itself and ensure its massive supply isn’t outpaced by more established destinations in marketing and service standards. The government’s intensifying global marketing (e.g. high-profile tourism campaigns, partnerships with major airlines and cruise lines) suggests they are aware of this and are proactively courting demand.
Overall, the five-year outlook for Saudi hospitality is one of high growth with manageable growing pains. Investors should expect continued top-line growth (total tourist arrivals, total hotel room nights) in double-digit percentages annually, but also be prepared for intense competition in certain segments and markets as new hotels fight for share. Markets like Riyadh and Jeddah might see a performance dip before the major event boosts (Expo, World Cup) provide a jolt. Makkah/Madinah will likely remain solid due to guaranteed pilgrim flows, though even there, the sheer volume of new hotels implies travelers will have more choice (potentially moderating pricing power for older assets). In summary, Saudi Arabia is scaling up its hospitality sector at an unprecedented rate; the next five years will set the stage, and by 2030 we will see whether demand and supply reach the envisioned equilibrium.
Capital Markets and Underwriting Implications
Investment and Sales Activity: Saudi Arabia’s hotel real estate market, historically quite limited in transaction volume, is beginning to see more activity as the sector matures. High-profile deals are signaling growing investor appetite. For instance, in late 2024 Albilad Capital (a Riyadh investment bank) acquired the 269-key Mövenpick Hotel & Residences Riyadh for about SAR 1.0 billion (~$267 million), one of the largest single-asset hotel transactions ever in Saudi. The pricing (roughly $1 million per key) underscores the confidence in Riyadh’s long-term prospects and the willingness of local capital to invest in stabilized trophy assets. Likewise, Saudi Arabia’s Public Investment Fund has been active internationally – e.g. acquiring a 49% stake in Rocco Forte Hotels (a luxury European hotel chain) – which is expected to facilitate that brand’s entry and expansion in the Kingdom. These moves demonstrate that capital is flowing both into and out of Saudi hospitality, integrating the market more with global investment trends.
That said, the majority of hotel “investment” in Saudi to date is still in the form of greenfield development rather than buying existing assets. Much of the new supply is funded by government-related entities or local developers rather than traditional institutional investors. Sales of operating hotels remain relatively infrequent, partly because many assets are family-owned or considered strategic (especially those in Makkah/Madinah, often held by domestic owners due to the religious significance and historically limited foreign access). We are, however, observing the emergence of REITs and funds focusing on hospitality assets, which could increase liquidity. For example, several Saudi REITs (publicly listed real estate funds) have acquired hotel properties as part of their portfolios (including assets in Makkah leased to operators). As more hotels stabilize and generate a track record, we anticipate more buy-sell activity from 2025 onward, with regional Gulf investors and Saudi institutions being primary buyers. International hotel investors (private equity, global REITs) are monitoring Saudi, but many remain in “wait and see” mode until assets season and legal frameworks (e.g. long-term land leases, freehold rights in economic zones) become clearer.
Valuations and Pricing Trends: Determining pricing in a fast-evolving market like Saudi Arabia can be challenging due to limited comps. The Riyadh Mövenpick deal suggests prime hotel assets in Riyadh can command cap rates in the mid-single digits (if we infer an NOI, though not publicly disclosed). In Makkah, values per key are extremely high for properties near the Grand Mosque (often exceeding $1 million/key as well), but the operative model there can differ (many hotels operate on annual lease agreements or condo-hotel structures selling rooms to investors). Jeddah and Eastern Province hotels have historically transacted at lower price points, but with improving performance we expect some cap rate compression. One noteworthy factor: land value and development cost inflation. The cost to build new hotels in Saudi (especially luxury) is significant – high construction costs, imported materials, and often extravagant designs. This means replacement cost is high, which can buoy valuations of existing assets since it’s often cheaper to buy than build in mature locations. Conversely, the government sometimes provides land or incentives for key projects, which complicates true cost comparisons.
Lending and Financing: From a lender’s perspective, underwriting hotels in Saudi Arabia requires a nuanced approach given the growth story. Local banks have been selective in pure commercial lending to hospitality, with many preferring to lend alongside government guarantees or to large conglomerates. However, the environment is improving – the establishment of the Tourism Development Fund (with capital to co-fund projects) has spurred banks to participate with more confidence, knowing there’s public support. Also, interest rates in Saudi (SAMA rates) track US rates; as of 2025, rates are relatively high, so debt service coverage will be a key consideration. Projects with long lead times (like resorts in remote areas) might opt for equity-heavy financing to avoid large carry costs, whereas city hotel projects can secure more typical construction loans if pre-opening demand indicators are strong.
Underwriting Assumptions – Caution Advised: Given the supply wave and evolving demand patterns, underwriters should build in conservative ramps and contingencies. Key considerations:
Stabilization Period: New hotels may take longer to stabilize at market occupancy. Instead of the typical 2-3 year ramp, some Saudi projects (especially resorts and mega-project hotels) might need 4-5 years to reach target occupancy as the destination develops. Underwriting should model a gradual occupancy increase, possibly with occupancy in year 1 as low as 30-40% for remote resorts, 50-60% for new city hotels, then climbing.
Seasonality and Mix: Use granular seasonality assumptions. For Makkah/Madinah hotels, a realistic projection might assume e.g. 100% occupancy for 60 days of the year (Ramadan, Hajj, peak Umrah months) and much lower (30-40%) for off-season months, rather than a flat annual average. Similarly, business hotels in Riyadh should factor in weaker summer and holiday periods when government business slows. Blending these will yield more accurate annualized occupancy/ADR inputs.
ADR Growth: While the overall trend in Saudi ADR has been upward (due to product mix and post-pandemic recovery), going forward ADR growth may be constrained by competition. It would be prudent to cap annual ADR growth assumptions at inflation or a few points above, except in unique cases. For example, a luxury resort in AMAALA might justify high ADR growth as it ramps, but an upscale hotel in Riyadh’s saturated market might see flat ADR until excess supply is absorbed. Also, one should consider introductory discounts many new hotels will offer to build market share.
Expenses and Profitability: A challenge for new hotels is staffing and operating costs. With many hotels opening simultaneously, there is competition for trained staff, potentially driving up payroll costs. Additionally, in Saudi Arabia new regulations (like higher Saudization quotas – requiring a certain percentage of Saudi employees at competitive wages) can increase expense ratios. Energy costs are low domestically, but other OpEx line items (food imports, etc.) can be high for luxury properties. Underwriting should perhaps use a slightly higher operating cost margin in early years to account for inefficiencies and then improve it as operations stabilize. MMCG’s data on full-service hotel profitability indicates that gross operating profit margins currently average around 45-50% in Saudi, but this can dip when occupancy is low. Lenders would likely stress test deals at lower margins or occupancy to see break-even points.
Exit Strategy/Yields: For investors, an important consideration is the exit cap rate or terminal value. As the market matures and more transactions occur, cap rates could compress (especially if Saudi gets an investment-grade image in hospitality). But given current global uncertainties, underwriting with relatively conservative exit yields (e.g. 8-10% in secondary markets, perhaps 7-8% in Riyadh for stabilized assets) is advisable in the near term. The exception might be iconic assets (e.g. a hotel in the Holy Mosque vicinity) which might warrant very aggressive valuations due to irreplaceable location. In any case, demonstrating multiple exit scenarios – sale to a REIT, or refinancing with local institutions, etc. – will be important for project sponsors when pitching to lenders or equity partners.
Investor Appetite: The overall appetite remains strong, particularly from local and regional players who understand the market’s potential and risks. Family offices in the Gulf, Saudi corporate groups (many of whom historically built hotels as a side investment), and sovereign entities will continue to dominate hotel ownership. We also see growing interest from Asia (China, Southeast Asia) in joint ventures, as those countries eye the Muslim travel market and Belt-and-Road opportunities. Western institutional investors are likeliest to enter via fund structures or once assets have a performance history. As transparency improves (with firms like MMCG and STR providing market data) and as Saudi Arabia’s regulatory environment becomes more investor-friendly, the risk premium associated with Saudi assets should decline. This would naturally boost values and make financing easier.
In summary, Saudi Arabia’s hospitality capital market is transitioning from a development-dominated, relatively illiquid state to a more balanced, transaction-oriented market. Early movers have an opportunity to ride the growth curve, but they must underwrite with discipline given the high supply pipeline and the dependency on ambitious tourism targets. Prudent underwriting – assuming realistic ramps, potential soft spots in performance, and ensuring strong sponsorship or guarantees – will be key to securing financing and achieving target returns in this dynamic environment.
Development Opportunities and Infrastructure Outlook
The rapid evolution of Saudi Arabia’s tourism sector has opened a variety of development opportunities across the country. Equally important, the government’s parallel investment in infrastructure is creating the backbone needed for these opportunities to thrive. Below, we outline key opportunities and contextual factors investors should consider:
Key Development Opportunities:
Mid-Market and Budget Hotels: Thus far, much of the new supply has skewed luxury, yet there is a significant gap (and growing need) in midscale and economy accommodations. As domestic travel rises and millions more middle-class pilgrims come from abroad, demand for affordable, quality hotels will increase. Developing 3-star or 4-star hotels in cities like Makkah, Madinah, and secondary cities (or even in Riyadh for domestic business travelers) is a potentially lucrative niche. Government data shows domestic tourists are price-sensitive; tapping into that with branded limited-service hotels (think Holiday Inn Express, ibis, etc.) could generate high occupancy year-round. The pipeline currently has only ~8% of rooms in the Midscale/Economy segment, so these projects face less competition and could benefit from government incentives aiming for diverse offerings.
Serviced Apartments and Branded Residences: Culturally, many Gulf travelers (including Saudis) prefer larger apartment-style accommodations for family groups. We’re already seeing strong performance of furnished apartments in Riyadh and Jeddah. Developing serviced apartments – either standalone or as part of mixed-use projects – can capture extended-stay corporate demand (for long projects, consultants, etc.) as well as families on leisure. Branded residences (condo-hotel models) are another opportunity in Riyadh, NEOM, and Red Sea resorts, allowing developers to sell units to investors and still rent them as hotel inventory. This model has been successful in Dubai and could take off in Saudi’s resort destinations under global luxury brands.
Resorts and Entertainment Hotels: With giga-projects leading the way, there are opportunities for private developers to create complementary resorts. For example, beyond the flagship Red Sea islands, there are countless untapped coastal areas that could house smaller boutique resorts or eco-lodges, appealing to niche markets (diving enthusiasts, wellness retreats, etc.). Similarly, around Qiddiya and other theme parks, family-oriented resorts (with water parks, etc.) could capture those visiting the attractions. AlUla’s heritage draws present chances for lodge-style developments or desert adventure camps (some are already in the works, but more will be needed as visitation grows). Essentially, experiential travel is on the rise globally, and Saudi Arabia’s diverse landscapes (mountains, desert, sea, volcanic areas in Harrat Khaybar, etc.) offer a blank canvas for innovative hospitality concepts beyond just city hotels.
Meetings & Conference Hotels: As the Kingdom looks to host more international summits and exhibitions (e.g., there is talk of creating a major convention center in Riyadh, and Jeddah is building one as well), there’s opportunity for meetings-focused hotels with large conference facilities. A developer could consider an upscale convention hotel in Riyadh’s King Abdullah Financial District or near the Expo 2030 site, to cater to that MICE (Meetings, Incentives, Conferences, Exhibitions) demand. Likewise, coastal cities like Jeddah or Dammam could benefit from conference resorts to host regional events (taking advantage of tourism appeal alongside business). Given Vision 2030’s emphasis on making Saudi a business and events hub, properties that can serve large delegations will be in demand.
Localized Opportunities in Emerging Cities: Each region has its own draw which can be leveraged. For instance, Abha (Asir region) – known for cooler weather and green scenery – is underdeveloped in terms of resorts; a mountain resort there could capture summer vacationers escaping the heat. Taif, historically a summer capital, might see revival with planned new airport and leisure parks – a chance for new hotels and resorts. Yanbu on the Red Sea is a port and diving center that could have more beachfront hotels. The government’s “Saudi Downtown” initiative is revitalizing downtowns in 12 cities (like Al-Khobar, Al-Ahsa, Buraidah, etc.), which will likely need new hotels to support business and leisure in those cities. Developers who move early in these secondary markets, aligning with government plans, might enjoy first-mover advantages and land incentives.
Infrastructure Investments – Enabling Growth: The hospitality boom is underpinned by unprecedented infrastructure upgrades, which both expand capacity and improve the tourist experience:
Airports: Saudi Arabia is investing heavily in aviation to improve access. Riyadh’s King Salman International Airport project (expansion of RUH) will make it one of the world’s largest airports, with planned capacity over 100 million passengers/year by 2030. Jeddah’s King Abdulaziz Int’l opened a new terminal in 2019 and continues to scale up (targeting 50+ million capacity). New airports are also coming online – a dedicated Red Sea International Airport (opened for initial operations in 2023 to serve the new resorts) and an upcoming NEOM International Airport (planned to be a global hub with futuristic amenities). Smaller airports in tourism hotspots (AlUla, Taif, Qassim, Hail, etc.) are being upgraded or have increased flights. Furthermore, the national carrier Saudia and the new Riyadh Air are collectively ordering hundreds of new planes and opening new routes. These improvements mean more direct flights from major source markets and easier domestic connectivity, directly translating into more hotel guests. For example, nonstop flights from China or Europe into Riyadh or Jeddah eliminate what used to be stopovers, making Saudi a more competitive destination.
Ground Transport: Within the country, mobility is improving via massive projects. The Riyadh Metro (six lines) is nearing completion and will transform how visitors move around the capital by 2025–2026. Jeddah is planning its own metro and light rail. Importantly, the Haramain High-Speed Railway now links Jeddah, Makkah, and Madinah at speeds of 300 km/h – cutting travel time for pilgrims and effectively enlarging the hotel market (e.g. pilgrims can stay in Jeddah and take a 30-minute train to Makkah). There are plans to extend high-speed rail to other cities (a proposed land bridge rail line from Jeddah to Riyadh could eventually connect into the GCC rail network). Highways are also being expanded: a new causeway to Bahrain (King Hamad Causeway) is in the works, which could boost weekend travel between Saudi and Bahrain in both directions. For more remote resorts, new roads and even heliports or seaplane services are being established (the Red Sea Project is using seaplanes to ferry guests among islands). This web of transport infrastructure means previously hard-to-reach attractions will become accessible, unlocking new locations for hotel development and making multi-destination itineraries within Saudi feasible for tourists.
Urban Development & Amenities: The broader urban transformations underway will also benefit hospitality. In Riyadh, projects like King Salman Park (one of the world’s largest urban parks) and Sports Boulevard will create new recreational areas that draw visitors and support adjacent hotels. Water infrastructure (like desalination for the Red Sea resorts) and sustainable energy projects (NEOM’s 100% renewable energy plan) ensure that large-scale resorts can operate reliably. Additionally, the relaxation of some social rules – e.g. allowing public entertainment, cinemas, music events – and the introduction of tourist-friendly services (from ride-hailing apps to English signage and trained tourist police) all improve the environment for visitors, encouraging longer stays and repeat visits.
Technological Enhancements: Being built as “smart destinations,” places like NEOM and certain new city districts will have high-tech integrations (cashless systems, AI-driven services, etc.). While these might not directly drive tourist numbers, they enhance the visitor experience. Saudi tourism authorities are also leveraging tech for marketing (using VR/AR to showcase heritage sites globally) and for operations (e-visa platforms, the “Eatmarna” app for Umrah scheduling, etc.). A seamless digital experience – from visa issuance to booking to on-ground navigation – increases tourist satisfaction and likelihood to travel. Hotels in the Kingdom are increasingly aligning with these efforts (for instance, integrating their booking with the government’s central platforms for Hajj/Umrah packages).
Broader Context: Perhaps the single most significant factor is the government’s unwavering commitment to tourism as a pillar of the future economy. The fact that over $800 billion is earmarked for tourism investments through 2030 (across public and private sectors) is staggering. It means that even if there are global headwinds, Saudi Arabia has the financial wherewithal to continue its projects and potentially stimulate demand (for example, by subsidizing tour operator packages or offering grants for airlines to open routes). The Kingdom’s entry into the global tourism arena is relatively recent, and it is spending heavily to catch up – this includes soft infrastructure like hospitality training schools, partnerships with global event organizers (to bring festivals, art biennales, etc.), and PR campaigns to reshape perceptions. As these efforts bear fruit, Saudi Arabia could very well transition by 2030 from an “emerging” destination to an established must-visit location for multiple traveler segments.
Sustainability and Long-Term Outlook: A final note on development – increasingly, Saudi Arabia is emphasizing sustainable and environmentally conscious development (e.g. Red Sea Project’s strict conservation standards, NEOM’s zero-carbon city concept). This aligns with global travel trends where tourists and investors value sustainability. Projects that incorporate eco-friendly design, community involvement (employing locals), and cultural authenticity will not only align with government priorities (making approvals and support more likely) but also appeal to the growing segment of conscientious travelers. Thus, there is opportunity in eco-tourism and cultural tourism projects that protect heritage and nature – from wildlife reserves with lodges to restoration of historical villages into boutique hotels.
In conclusion, the convergence of huge infrastructure upgrades and diverse development opportunities makes Saudi Arabia perhaps the most exciting hospitality growth story in the world right now. Investors and developers who understand the local context – and partner with the public sector where possible – can secure prime positions in this burgeoning market. The key is to match the right product to the right location and demand driver: a luxury resort in a pristine environment for international high-end tourists, a mid-market hotel in a city center for domestic travelers, a themed resort next to a new theme park, and so on. With the roads, airports, and utilities being put in place at rapid pace, what was once unreachable desert or coastline can now be the next tourism hotspot. Those who invest wisely in these opportunities stand to benefit from Saudi Arabia’s ambitious journey to 2030 and beyond.
Conclusion
Saudi Arabia’s hospitality sector is undergoing an extraordinary expansion, fueled by Vision 2030’s transformative goals. The current market exhibits solid performance at the national level – with occupancy around the low 60s and ADR in the high $100s – underpinned by a strong post-pandemic recovery. Beneath those averages, we see divergent submarket trends: Riyadh and Jeddah facing short-term pressure from new supply, Makkah gaining momentum as pilgrim volumes rise, and entirely new markets like NEOM on the horizon. The development pipeline is unparalleled, with tens of thousands of rooms coming online in the next few years across luxury coastal resorts, entertainment cities, and revitalized urban centers. This wave of supply, combined with massive infrastructure projects, will undoubtedly pose challenges (from potential oversupply in certain locales to the operational ramp-up of many new properties). Yet, it is also laying the foundation for Saudi Arabia to emerge as a global tourism heavyweight by the end of the decade.
For developers and investors, the opportunity landscape is vast – but selectivity and due diligence are paramount. Backing projects that align with clear demand drivers (be it religious, corporate, or leisure) and that have competitive differentiation will be crucial. Investors should also take comfort in the government’s robust support – both financial and strategic – which mitigates some risks but not all. Prudent underwriting, as discussed, will separate successful investments from missteps in this rapidly changing market. Lenders will favor deals with experienced sponsors, reasonable leverage, and realistic ramp-up expectations.
From a macro perspective, the Saudi market offers a compelling growth story relatively insulated from some global tourism risks (for instance, religious travel is less elastic than pure leisure travel, and government spending is counter-cyclical thanks to oil revenues). As long as oil prices and fiscal health remain strong, Saudi Arabia will keep investing in tourism through any global economic swings. However, achieving the lofty visitor targets will require sustained marketing and perhaps course-corrections (ensuring service quality keeps up with hardware development, easing any remaining travel barriers, etc.). The early returns are promising – record tourist numbers in 2024 and accolades like the WTO naming Riyadh a top city for tourism growth.
In summary, Saudi Arabia’s hospitality market in 2025 presents a mix of immediate robust performance and long-term exponential potential. It is a market where one can witness new hotels opening almost monthly, cities being master-planned with tourism at the core, and where the world’s largest hotel companies are scrambling for a presence. For stakeholders – whether developers, investors, or lenders – being part of this journey offers diversification and growth that few other markets can match, albeit with the need for careful navigation of its unique dynamics. The next seven years to 2030 will be critical. By then, if Vision 2030’s aims are realized, Saudi Arabia will host mega-events, welcome hundreds of millions of visitors, and operate a hotel inventory rivaling established destinations – all of which would translate into substantial rewards for those who invested and operated wisely in the current period.
Saudi Arabia is, in effect, betting big on hospitality as a cornerstone of its future economy. The market conditions evaluated in this report suggest that this bet is well-founded, provided the momentum of development is matched by equal vigor in cultivating demand and maintaining performance discipline. For the savvy investor or developer, the Kingdom’s hospitality sector offers a rare combination of scale, growth, and government-backed security – a combination that can yield attractive returns and legacy projects in the decades to come.
October 31, 2025, by a collective authors of MMCG Invest, hotel feasibility study consultants.
Sources:
Saudi Ministry of Tourism;
World Travel & Tourism Council;
Arab News/JLL report (Sep 2025);
Lodging Econometrics Pipeline Report (Q2 2025);
The Saudi Boom (Mar 2025).
(All MMCG performance data and figures are from the proprietary MMCG hospitality database.)
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