RIYADH: Saudi Arabia’s hospitality revenue is expected to see an compound annual growth rate of 7.5 percent from 2023 to 2028, propelled by government-led initiatives, according to new data. 

This growth, in line with the Gulf Cooperation Council average, is supported by various projects under the Kingdom’s Vision 2030 plan, as stated by UAE-based investment banking advisory firm Alpen Capital’s latest report. 

The report further noted that the UAE is poised to grow at a compound annual growth rate of 6.9 percent from 2023 to 2028. This growth will be driven by infrastructure modernization and easier tourist visa rules.  

Additionally, Qatar, Kuwait, Oman, and Bahrain are projected to experience even higher growth rates. 

Reflecting on Saudi Arabia’s hospitality industry, Sameena Ahmed, managing director at Alpen Capital, said: “Growth of the sector is expected to be spurred by economic recovery, thriving tourism and concerted efforts of the governments to reduce reliance on hydrocarbon revenues.”  

Alpen Capital’s report forecasts the GCC hospitality sector’s revenue to grow at a CAGR of 7.5 percent from 2023 to 2028, reaching approximately $48.1 billion by 2028.  

This growth is driven by economic expansion, increased tourist arrivals, and numerous mega meetings, as well as incentives, conferences, and exhibitions coupled with sporting events in the region.   

Additionally, the sector’s key operating metrics — occupancy rate, average daily rate, and revenue per available room — are expected to improve over the next five years. 

The occupancy rate is forecasted to increase from 64.6 percent in 2023 to 69.3 percent in 2028, while ADR is expected to grow at a CAGR of 1.9 percent. Additionally, RevPAR is forecasted to experience a CAGR of 3.3 percent over the same period. 

“The GCC is solidifying its global tourism footprint through successful hosting of major MICE, cultural and sporting events. Anticipated to attract millions of tourists, these events are poised to bolster the growth of the hospitality industry,” the report added.  

It further stated that the region has implemented several liberalized measures to boost tourist inflow, such as unified GCC visas, Dubai’s five-year multiple-entry visa, and Saudi Arabia’s instant e-visa options.  

Investments in transport infrastructure, including new airports, expansions of existing aviation facilities, and a regional rail network, are also expected to support tourism activity and increase demand for hospitality services.  

However, the sector faces challenges from global economic uncertainties and geopolitical conflicts, the report highlighted.   

Inflation and monetary policies may reduce consumer confidence, leading to decreased spending on international travel. Additionally, a shortage of skilled workers presents a significant hurdle, affecting the ability to recruit and retain trained professionals.  

Alpen Capital further emphasized the sector’s embracing of digitalization, with operators leveraging technologies like artificial intelligence, machine learning, cloud platforms, and mobile apps to personalize experiences and enhance customer engagement.   

The region is also adopting eco-friendly practices and conservation initiatives to meet the demand for responsible travel. Cultural, health, and wellness tourism are rapidly growing, reflecting shifting consumer preferences and a commitment to environmental conservation.  

“A rising trend toward sustainable tourism and responsible travel is gaining ground across the GCC’s hospitality sector due to increasing ecological awareness among consumers worldwide,” said Sanjay Bhatia, managing director at Alpen Capital.    

“Despite market competition and geopolitical uncertainties, the industry continues to strategically enhance visitor experiences and stimulate demand through innovation and consolidation. We expect to witness healthy domestic and cross-border M&A activity, as the sector advances to respond to the rising demand for accommodation and hospitality services,” he added.   

Furthermore, global property giant Knight Frank anticipates that Saudi Arabia is gearing up to expand its hospitality sector by developing 320,000 new hotel rooms by 2030.  

In a report released in April, the consultancy firm disclosed that as much as 67 percent of the planned hotel room supply in the Kingdom would fall in the “upscale” or “luxury” categories, referring to 4-star and 5-star accommodations, respectively.     

This move aims to cater to the projected surge in tourism, with 150 million domestic and international tourists expected by 2030.    

“With a target of welcoming 150 million visitors by 2030 — a 50 percent increase from its previous goal — the government is actively exploring various strategies to attract to international travelers,” Turab Saleem, partner and head of hospitality at Tourism and Leisure Advisory in Middle East and Africa at Knight Frank, said at that time.    

Saleem noted that this includes the development of cultural and entertainment offerings nationwide, which complement existing attractions like the Jeddah F1 Grand Prix and numerous entertainment seasons.    

“Noteworthy additions include 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,” he added.  

The consultancy’s analysis further revealed that Accor Hotel Group will slip from first to second largest hotel room operator in the country with an estimated 25,400 keys under management by 2030.   

Meanwhile, Marriott International will likely emerge as the most prominent hotel operator in the Kingdom, with around 26,200 hotel keys under management by 2030, Knight Frank disclosed.   

Furthermore, Riyadh’s winning bid to host the 2030 World Expo is projected to pump a significant economic boost of $94.6 billion into the nation’s capital, with an estimated 40 million visitors expected during the six-month-long exhibition.  

Consequently, this underscores the need to provide adequate accommodation for hotel staff. 

According to the World Trade Organization, 4-5-star hotels, on average, require one to two staff per room.   

This suggests somewhere between 232,000 and 387,000 key workers could require accommodation in this segment of the Kingdom’s hospitality market.