Saudi Arabia’s hospitality revenue is expected to see a compound annual growth rate of 7.5 percent from 2023 to 2028, driven by government-led initiatives, according to new data.
This growth, in line with the Gulf Cooperation Council (GCC) average, is supported by various projects under the Kingdom’s Vision 2030 plan, as stated by the investment banking advisory firm Alpen Capital‘s latest report.
Sameena Ahmed, managing director at Alpen Capital, commented on Saudi Arabia’s hospitality industry, stating: “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.”
GCC hospitality sector revenue forecast
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 events, as well as incentives, conferences, and exhibitions coupled with sporting events in the region.
Improving hospitality metrics
The sector’s key operating metrics, such as 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. RevPAR is forecasted to experience a CAGR of 3.3 percent over the same period.
GCC’s global tourism footprint
The report highlights that the GCC is solidifying its global tourism footprint through successful hosting of major MICE, cultural, and sporting events. These events are expected to attract millions of tourists and bolster the growth of the hospitality industry.
Liberalized visa measures, infrastructure investments
The region has also 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 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. 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.
Embracing digitalization and sustainability
The report also emphasizes 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.
Read more: Saudi Arabia sees 20 percent surge in passengers in 2024 at 111 million
Expansion plans
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, with 67 percent of the planned supply in the “upscale” or “luxury” categories. This move aims to cater to the projected surge in tourism, with 150 million domestic and international tourists expected by 2030.
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. This underscores the need to provide adequate accommodation for hotel staff, with 4-5-star hotels requiring one to two staff per room on average.
For more news on hospitality & tourism, click here.
