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.
The growth of hotel supply post-COVID is varied around the world. While the global average grew at a Compound annual Growth Rate (CAGR), which was 4% per year from 2019 to 2020, the MENA Region maintained a strong momentum with 3% over this period. This performance was better than the Americas (1%), Europe (3%), Asia-Pacific (8%), and Europe. Looking forward, MENA is projected to have a 4% CAGR between 2024 and 2028. This significantly exceeds the Americas’ (2%), Europe’s (1%), or Asia-Pacific’s (1%). The major projects underway in Saudi Arabia are largely responsible for this. Saudi Arabia is quickly becoming the premier tourist destination of the region. Saudi Arabia, with approximately 160,000 hotel rooms in operation currently and another 106,000 on the way, is set to become the largest tourist destination in the region by 2028.
Saudi Arabia is primed for Growth
Since 2019, the MENA Region has had the highest revenue per available room growth (RevPAR), outpacing Europe (+25%) the Americas (+18%) and Asia Pacific – -12%. Saudi Arabia’s transformation of its tourism industry is largely attributed to Vision 2030, strategic infrastructure investments and the country’s progress. Saudi Arabia’s National Tourism Strategy launched in 2016 has already exceeded its initial goals. Tourism’s contribution to GDP reached 11.5% by 2023. This is higher than the 2030 target of 10.5% and positions Saudi Arabia as a global leader.
Saudi Arabia’s RevPAR grew 23% between 2019 and 2024, attracting primarily regional investors. Notably, international visitation growth [i] Since the introduction of the tourist visa, in 2019, the number of international tourists has increased from 13.7% to 14.4%. Cities like Riyadh or Madinah have even outperformed established destinations. The country’s new destinations offer the most lucrative and unique opportunities for investors.
A unique investment opportunity
The report highlights Saudi Arabia’s emerging destination, Taif, and Al Ahsa as a new frontier in hospitality investment. It offers a unique chance for early movers to invest in these underserved areas. These cities in tier 2, which are rich with cultural heritage and potential but have not yet been developed, receive 23% of the total visitor numbers. This translates to around 20 million visitors per year. Quality hotel supply is limited in these cities, with only 25-30%. This leaves a large gap that investors can exploit.
Amr Elnady commented that investors looking for high growth opportunities in Saudi Arabia’s hospitality sector, should consider the potential of untapped cities such as Taif and Ahsa. These markets have a unique combination of increasing demand and limited supply. This creates a ripe environment for significant returns.”.
Initiatives by the government to encourage investment in these cities have a positive impact on the landscape. Investment Incentives from the Ministry of Tourism and Tourism Development Fund provide investors with additional support.
Elnady concluded, “Success is a matter of long-term planning and vision. We suggest investors look at a portfolio of both Tier 1 and Tier 2 locations in order to maximize their opportunities in Saudi Arabia’s growing hospitality sector.
Saudi Arabia is on a journey to become the global leader in tourism. The opportunity for early movers to take part in this growth represents an incredible chance. With the right investment and approach, investors can be at the forefront of the fastest growing and most dynamic hospitality market in the world.
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. Over the last five years, JLL’s Hotels & Hospitality Group has completed more than 7,350 assignments in over 20 different countries. The team of 370 people from around the world also handled valuations and advisory work. Hotel valuation, brokerage and asset management services from our team have helped hotel owners, investors and operators to achieve higher returns on their investments than any other advisors in the world.
