JLL released its latest report, ‘Unlocking the investment potential in Saudi Arabia’s hotel industry’, highlighting the Kingdom’s rapid ascent in the global tourism landscape which is creating unique investment opportunities in both its established and emerging cities for forward-thinking investors.
Hotel supply growth post-COVID has varied worldwide; while the global average grew with a Compound Annual Growth Rate (CAGR) of 4% annually from 2019 to 2024, the MENA region maintained strong momentum at 3% during this period. This performance outpaced the Americas (1%), matched Europe (3%), and trailed only behind Asia-Pacific (8%). Looking ahead, MENA’s projected 4% CAGR from 2024 to 2028 significantly outperforms the Americas (2%), Europe (1%), and Asia-Pacific (1%). This is largely driven by major development projects in Saudi Arabia, which is rapidly becoming the region’s premier tourism destination. With approximately 160,000 quality hotel rooms currently in operation and an additional 106,000 in the pipeline, Saudi Arabia is poised to become the region’s largest tourism destination by 2028.
Saudi Arabia primed for growth
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 progress in transforming its tourism industry, driven by Vision 2030 and strategic infrastructure investments, has been a major contributor to this success. The Kingdom’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% and positioning Saudi Arabia to emerge as a leading player on the global stage.
As 2024 came to a close, Saudi Arabia’s RevPAR had grown 23% since 2019, driving interest primarily from regional investors to date. Notably, international visitation growth [i] 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. However, it is the country’s emerging destinations that present the most unique and lucrative opportunities for investors.
A unique investment opportunity
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 tier 2 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 capitalise on.
Amr Elnady, Head of Hotels and Hospitality, MEA, commented, “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.”.
The investment landscape in these cities is further enhanced by supportive government initiatives. The Tourism Development Fund and the Ministry of Tourism’s Investment Incentives Program provide additional backing for investors willing to enter these emerging markets.
Elnady added, “Success in this evolving landscape requires a long-term vision and strategic planning. We recommend investors consider a diversified portfolio that includes both tier 1 and tier 2 locations to maximize their potential in Saudi Arabia’s booming hospitality sector.”
As Saudi Arabia continues its journey to become a global tourism leader, the opportunity for early movers in its tier 2 cities represents a unique chance to be part of 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.
JLL’s Hotels & Hospitality Group has completed more transactions than any other hotels and hospitality real estate advisor over the last five years, totaling $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. Our 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.
