Saudi Arabia leads the world in hotel supply growth

Jean Nouvel is working on a world-first

Saudi Arabia’s hospitality sector is growing fastest among the 50 most populated countries in the world. And there is good reason behind the country’s growth.

As part of the Vision 2030 initiative–a strategic effort to diversity the nation’s economy–the Kingdom aims to attract 100 million visitors annually by 2030. That ambitious goal requires a substantial increase to the nation’s hotel inventory, and current pipeline activity is a strong sign that efforts are well underway to meet the goal.

With 73,057 hotel rooms in the pipeline across the planning, final planning and construction phases, Saudi Arabia is projected for a dramatic 67.1 per cent increase in room supply once all projects are completed over the next two to three years. Such growth is a testament to the strength and prospectus of the nation’s strong cultural and economic resources.


What is underpinning the growth?

First, projected increases are distributed across several regions of the country, with four of six STR-defined submarkets expected to grow supply 75 per cent or greater if all projects are completed. For perspective, of the 1,975 STR-defined submarkets around the globe, less than 2 per cent (only 34) show projected supply growth of greater than 75 per cent.

While a significant portion of Saudi Arabia’s pipeline activity is concentrated in the holy city of Makkah (28,052 rooms under development), several other submarkets across the country are set to increase their hotel supply by 50 per cent or more.

With more than 60 per cent of the Kingdom’s total pipeline assigned to upscale and above segments, the growth is largely driven by higher-end hotels


For instance, the nation’s capital, Riyadh, currently shows 13,165 hotel rooms in the pipeline and a projected supply growth rate of 75.5 per cent. And on the western coast, the Red Sea port destination of Jeddah is expected to nearly double its number of hotel rooms from 11,507 to 22,705.

In all, based on percentage growth, the collective regions represent what is currently the world’s most robust hotel pipeline.

Second, while there is a healthy distribution of supply growth across the Kingdom, the religious centres of Makkah and Medina lead the nation with the largest projected increases.

In Makkah, the growth is centred in the city centre. More than 19,000 of Makkah’s rooms in planning or construction are located less than a mile from the Kaaba, the sacred sanctuary and spiritual centre of the Muslim world. And as travellers make the annual pilgrimage to the holy cities, many will travel through the port city of Jeddah to the West, which is just 40 miles from Makkah.

Finally, the hotels under development in the religious centres of Makkah and Medina are massive. In fact, with average sizes of 315 and 558 rooms, respectively, these projects are upwards of four times larger than the average pipeline project, with six projects having more than 2,400 rooms. Globally, of the 11 largest hotel projects under development (in terms of room count), six are in Saudi Arabia. Of those, five are in Makkah. This surge in massive hotels is a sign that developers have confidence that there will be plenty of demand to fill these rooms.

However, all these hotels under development are still not enough to meet the demand during Hajj, which attracts 2 to 3 million pilgrims annually (save for the time of the global pandemic, of course).

Furthermore, with more than 60 per cent of the Kingdom’s total pipeline assigned to upscale and above segments, the growth is largely driven by higher-end hotels, which could bode well for future rate growth.

In all, Saudi Arabia’s leading hotel supply growth, along with the strength of other Middle East hospitality markets such as Qatar and the United Arab Emirates, is further validation that the region is quickly rising as a global tourist destination.