Anticipated to advance at a compound annual growth rate (CAGR) of 7.5 percent from 2023 to 2028, Saudi Arabia’s hospitality sector is gearing up for significant growth. This trajectory aligns with the average for the Gulf Cooperation Council (GCC) and is largely attributed to government initiatives as part of the Vision 2030 strategy, as indicated in recent analysis.
An investment advisory firm has outlined that the hospitality industry in Saudi Arabia is likely to flourish, bolstered by economic revival, burgeoning tourism, and strategic efforts to diversify the economy beyond oil revenues.
Revenue in the GCC hospitality sector is predicted to climb at a 7.5 percent CAGR through 2028, potentially reaching around $48.1 billion. Factors fueling this increase include economic growth, a rise in tourist numbers, and a host of significant events in the region.
Key Metrics on the Upswing
Crucial performance indicators for the hospitality sector, such as hotel occupancy rates, average daily rates (ADR), and revenue per available room (RevPAR), are all expected to see improvements in the coming years. Projections suggest that hotel occupancy could grow from 64.6 percent in 2023 to 69.3 percent by 2028, while ADR and RevPAR are projected to increase at CAGRs of 1.9 percent and 3.3 percent, respectively.
Enhancing the GCC’s International Tourism Presence
The GCC is poised to enhance its position on the global tourism map by hosting an array of significant events, including MICE (Meetings, Incentives, Conferences, and Exhibitions) as well as cultural and sports gatherings, which are set to draw millions of visitors and support the hospitality sector’s expansion.
Visa Reforms and Infrastructure Development
Visa policies across the region are becoming more flexible to encourage tourism, featuring options like the unified GCC visa, Dubai’s long-term multiple-entry visa, and Saudi Arabia’s quick e-visa process. Investments in transportation infrastructure are also anticipated to promote tourism and drive demand for hospitality services.
Nonetheless, the industry must navigate challenges such as global economic volatility and geopolitical tensions. Inflation and monetary policy changes could impact consumer confidence and reduce travel spending. Furthermore, the sector faces a shortage of skilled workforce, which affects recruitment and retention of trained staff.
Digitalization and Sustainable Practices
The hospitality industry is increasingly adopting digital technology, with operators using AI, machine learning, cloud solutions, and mobile applications to customize experiences and increase customer engagement. Additionally, there is a move towards sustainable practices to respond to the growing interest in responsible travel.
Strategic Expansion Efforts
With ambitions to bolster its hospitality offerings, Saudi Arabia is set to develop 320,000 new hotel rooms by 2030, the majority of which will fall into the upscale and luxury categories. This expansion is aimed at accommodating an expected influx of 150 million tourists, both domestic and international, by the end of the decade.
The capital city of Riyadh, having secured the 2030 World Expo, anticipates an economic uplift of $94.6 billion, with an estimated 40 million visitors during the event. This highlights the necessity for adequate staffing in accommodations, with a requirement of one to two hotel staff per room in 4-5-star establishments.