$1trn Saudi development pipeline reinforces Vision 2030’s ambitious goals

Creating opportunities for hospitality investment with 315,000 hotel keys
$1trn Saudi development pipeline reinforces Vision 2030’s ambitious goals
Saudi’s ambitious Vision 2030 bolstered by $1 trn development plan

More than $1 trillion worth of real estate and infrastructure projects, including 315,000 hotel keys, are under development or in the pipeline in the Kingdom of Saudi Arabia, underpinning the ambition set out in the country’s Vision 2030 strategy, according to industry experts speaking ahead of the upcoming Future Hospitality Summit (FHS) Saudi Arabia, taking place at the Al Faisaliah Hotel in Riyadh, 7-9 May 2023.

The number of hotel keys is likely to almost double to around 200,000 in the next four to five years, with at least 50 percent of the proposed supply becoming operational by 2028, with some existing properties exiting from the market to make way for new, more competitive and appealing hotels and resorts.

Read more: Middle East hospitality sector to grow in 2023

Saudi is set to take its place on the world stage and showcase its vision of an ultra-modern future to a global audience, with a diverse array of giga and mega projects that will transform the country’s real estate landscape and redefine tourism, living, and lifestyle, according to leading real estate consultancy and FHS Saudi Arabia Sponsor, Knight Frank.

Turab Saleem, Head of Tourism and Hospitality at Knight Frank, said: “The Saudi government’s strategy includes attracting 100 million visitors by 2030, and that means creating and delivering first-class gateways and developments, such as the $500 Billion NEOM. The $1 trillion projects already underway represent just one-third of the total spending plan, reinforcing the country’s aggressive plan to deliver world-class infrastructure, hospitality, tourism, and residential facilities to meet the targets set out in Vision 2030.”

“The outlook for hospitality investment in Saudi looks promising, with hotel and tourism development not only focused on the major cities of Riyadh and Jeddah but spreading quickly to other parts of the country, too. Our analysis shows that the delivery of all planned hotel rooms – which cover the luxury, mid-market, and serviced apartment sectors – will cost around $110 billion.”

Saudi Vision 2030

Significant strides


Knight Frank’s views on hospitality investment in Saudi Arabia are echoed by FHS Sponsor, HVS, the leading global consultancy focusing on the hospitality sector, which says that the government continues to make significant strides in facilitating the growth of different sectors across the country, with notable investments in the hospitality and tourism space.

Hala Matar Choufany, President – of Middle East, Africa, and South Asia at HVS, said: “The surge in tourism and arrivals into Saudi over the last 18 months alone – largely the result of legislation changes and visa facilitation – is a testament to the country’s growing allure. Interestingly, this uptick is not confined to established destinations and sectors such as commercial and religious tourism. ‘Bleisure’ and leisure tourism are equally on the rise, with secondary cities welcoming new visitors from far and wide. As the country continues to diversify its offering, the outlook looks positive, and, while it is early days in terms of planning and future investment, the hospitality market and investment opportunities are significant.”

Knight Frank’s data research on Saudi hotels outside of the giga projects shows that there are currently 129,000 hotel and serviced apartment keys in the country. By 2030, that figure will have grown by more than 60 percent to 212,000 keys in 5-star, 4-star, 3-star, and under, and serviced apartment sectors, with 4-star properties accounting for almost half of the total development cost of $21.3 billion. Meanwhile, the Kingdom’s giga projects represent nearly 73 percent of the hotel supply pipeline, with a 62 percent surge in the number of 4- and 5-star hotel rooms by the end of the decade.

Saudi Vision 2030

50,000 jobs


And Saudi Arabia’s tourism expansion is not limited to land-based destinations and attractions. According to the Saudi Public Investment Fund, the cruise industry, which is set to create up to 50,000 jobs in the country, is expected to bring in 1.5 million visitors annually within the next five years.

Turab Saleem continued: “As we stand at the precipice of a sea-change for Saudi Arabia’s hospitality landscape, we are moving from vision to reality. The herculean, $110 billion task of transforming Saudi Arabia’s hospitality landscape goes well beyond the delivery of extra hotel room keys, and care and attention must be taken to launch the correct quantum of products in the right locations. Delivering as per the plan will create several opportunities – and challenges; challenges that we believe can be overcome and turned into even more opportunities by forcing other sectors to develop in parallel and support Saudi’s hospitality development strategy.”

New trend


HVS anticipates that franchises and lease agreements are set to become a new trend in the Saudi Arabian hospitality market.

Hala Matar Choufany said: “Considering the size and scale of developments as well as the nature of ownership, it is evident that the Saudi market will benefit from multiple arrangements, such as franchises, as it relates to some of the established hotel owners, growth in local management companies, and rise and growth of homegrown brands. We also foresee an increase in lease agreements as the markets become more mature and stable. While the traditional hotel operating model remains relevant, terms have become more competitive and operators’ ability to drive value is key to negotiations.

‘To effectively invest in change, there needs to be a shift in mindset from offering a room and creating an overall, memorable experience. This means establishing a much deeper understanding of the type of guests and their needs, expectations, willingness to spend, and other preferences, which will be key to the success of positioning an asset as a destination rather than merely a hotel. With rising competition and declining brand loyalty, the challenge to remain relevant has become more important than ever.”

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