Religious Tourism Bolsters Saudi Hotel Industry Amid Global Travel Disruptions

The Saudi hotel industry is showing resilience amid global travel disruptions, largely due to the steady demand from Hajj and Umrah pilgrims. As of June 2026, hotel occupancy in Madinah reached 75.1%, the highest in the Kingdom, while Makkah's occupancy increased to 68.2%. A recent JLL report highlights that religious tourism centers are outperforming business travel-oriented hotel markets. The strong performance is supported by continued domestic travel and strategic revenue and cost optimization by industry players. Makkah experienced the strongest hotel performance growth year-to-date until June 2026, with occupancy rising by 4 percentage points compared to the same period last year. Revenue per Available Room (RevPAR) also grew by 8.7%, reinforcing Makkah's position as a robust market amid broader travel disruptions. The increase in pilgrim arrivals during the Hajj season compared to the previous year contributed to this growth. Demand for accommodation did not significantly weaken after the Hajj season ended, with post-Hajj demand effects extending to Madinah and sustaining the hotel industry's performance in both Holy Cities throughout Q2 2026. Madinah recorded the highest occupancy rate in Saudi Arabia at 75.1%. Stable pilgrimage travel demand limited the decline in RevPAR to 2.4%, despite a weakening Average Daily Rate (ADR). Saud Al Sulaimani, CEO of JLL Saudi Arabia and Head of Capital Markets KSA, stated that domestic travel and pilgrim visits provide a stable occupancy foundation for the hotel industry. He noted that as the Kingdom continues to achieve its Vision 2030 goals, strategic investments in infrastructure and asset diversification are transforming the sector, positioning Saudi Arabia as a multifaceted destination ready to attract a diverse international audience beyond its traditional pilgrimage travel market. Riyadh experienced the deepest decline due to weakened corporate demand and increased hotel supply competition, with occupancy dropping by 9.2 percentage points to 47.6% and RevPAR falling by 23.2%. Jeddah showed more resilience, with occupancy decreasing by 0.9 percentage points to 66.4%, although a decline in ADR led to a 7.2% reduction in RevPAR despite ongoing domestic leisure travel activity. The resilience of religious tourism and domestic travel continues to attract investment in markets with strong demand fundamentals. Makkah and Madinah are expanding accommodation capacity to support the growth targets for religious tourism and pilgrim visits in Saudi Arabia. Makkah's hotel inventory increased by approximately 1,100 rooms in Q2 2026, while Madinah added around 220 rooms during the same period. This expansion brings the total accommodation inventory in both Holy Cities to 354,800 rooms. Expansion is also occurring in other cities, with Riyadh's hotel inventory growing by about 490 rooms and Jeddah adding approximately 180 rooms in Q2 2026. The increase in hotel supply in major cities is expected to intensify competition, making asset quality, differentiated guest experiences, and brand positioning increasingly important for maintaining performance. Hotel operators are also focusing on revenue optimization, cost efficiency, and technology-driven operations to adapt to changing demand patterns and protect profitability.