Saudi Arabia's Mid-Scale Hotel Investment Opportunity

Saudi Arabia is experiencing a tourism boom under its Vision 2030, with a target of 150 million visitors by 2030. Tourism is a key component of the Kingdom's economic diversification, contributing significantly to the national GDP. The development pipeline includes plans for an additional 358,000 hotel rooms by the end of the decade.

In 2024, 116 million visitors were recorded, with 74% being Saudi nationals. Domestic travel is frequent, with 67% of residents traveling within the Kingdom at least once every three months. Quality is a major factor for domestic travelers, with 48% choosing hotels and 83% of those opting for 4 or 5-star properties. However, there is a gap between quality expectations and affordability, as 44% of travelers are only willing to spend up to SAR 525 per night on accommodation.

Despite this demand, hotel development is focused on luxury, with 75% of new supply by 2030 expected to be in this segment. The mid-range category is shrinking, with 3-star rooms projected to decline from 15% to 10% of total supply. This presents an opportunity for investors to focus on mid-scale and budget hotels, catering to the cost-sensitive domestic market.

Around 82% of existing hotel rooms are concentrated in Riyadh, Jeddah, DMA, Makkah, and Madinah. However, domestic travelers are exploring destinations like Abha, Taif, AlUla, Umluj, and Jizan, indicating a need for investment in these areas. Expanding tourism infrastructure in these secondary destinations is crucial for achieving Vision 2030's goals of diversifying leisure options and encouraging exploration across the Kingdom.

For a developer: The opportunity in Saudi Arabia lies in balancing luxury developments with mid-scale hotel investments. By focusing on the underserved mid-range market and expanding into emerging destinations, developers can tap into a reliable domestic customer base and reduce delivery risks. This strategic approach aligns with Vision 2030's objectives and offers long-term resilience in the hospitality sector.