Tourist numbers for Saudi Arabia has been recording some triple-digit growth rates of late. To keep that sort of momentum going, the Kingdom has embarked on a massive expansion of its hospitality sector. Image Credit: Shutterstock

Dubai: All those massive tourism focused projects requires Saudi Arabia to amp up its hotel capacity. The Kingdom is doing just that with an estimated 320,000 new hotel rooms to be added by 2030, according to latest forecasts by the consultancy Knight Frank.  

The Saudi market will need it as 150 million domestic and international tourists are expected by the end of the decade. Of the new hotel room supply, 66 per cent will be in the 'luxury', 'upper upscale' and 'upscale' categories. By 2030, this segment will 'expand further to 72 per cent of the market, equating to 251,500 hotel rooms', Knight Frank report notes.

By end 2023, Saudi Arabia had seen nearly 100 million domestic and international tourists, with the tourism and hospitality sector contributing to nearly 6 per cent of the GDP. This puts the sector on track to hit the government’s 10 per cent target by the end of the decade.

Around 30 million religious tourists are expected to visit the Holy Cities by 2025 and the government projects that this figure will rise to 50 million by 2030.

Biggest source markets

Tourism generated spending in the first-half of 2023 rose to SR87 billion, a 132 per cent rise on 2022. International visitor numbers gained 142 per cent, totalling 14.6 million arrivals. The biggest source markets were Bahrain (2.2 million), Kuwait (1.9 million) and Egypt (1.5 million).

"With a target of welcoming 150 million visitors by 2030 — a 50 per cent increase from its previous goal—the government is actively exploring various strategies to attract to international travellers," said Turab Saleem, Partner and Head of Hospitality, Tourism & Leisure Advisory, MENA.

"This includes the development of cultural and entertainment offerings nation-wide, which complement existing attractions like the Jeddah F1 Grand Prix and numerous 'Entertainment Seasons'.

Added to this are new theme parks such as Boulevard World in Riyadh, alongside the licensing of 24 additional theme parks by the Saudi General Entertainment Authority over the past year.

Riyadh winning the bid to host the 2030 World Expo is expected to inject $94.6 billion into the nation's capital, with an estimated 40 million visitors expected during the six-month event.

Worker accommodation

According to Faisal Durrani, Knight Frank's Partner – Head of Research, MENA, "Notwithstanding that worker-to-room ratios in Saudi can sometimes be lower than global averages, the provision of key worker accommodation for the hospitality sector will be essential ensure its future success.

"Not only does accommodation of this type help to mitigate against staff attraction and retention issues, but it also creates investment grade assets. Indeed, elsewhere in the GCC, key worker accommodation can trade for yields of as much as 10 per cent, depending on the location, quality, lease tenure and of course the tenant.”