Saudi Arabia plans to open 315,000 new hotel rooms by 2030

With an estimated development cost of $37.8bn, the additions will result in nearly 450,000 keys, with Neom leading the supply pipeline, report says

Red Sea Global's Desert Rock project will be home to 48 villas and 12 hotel rooms in western Saudi Arabia. Photo: RSDC

Saudi Arabia plans to add 315,000 new hotel rooms with an estimated development cost of $37.8 billion by 2030, as the kingdom continues to expand its hospitality, tourism and travel industries to diversify its economy away from oil.

The new planned additions will take the total stock to nearly 450,000 hotel rooms, with giga-projects such as the futuristic city of Neom leading the supply pipeline, according to Knight Frank's 2023 Saudi Report.

For Saudi Arabia, which has a population of about 36 million, domestic tourism is key to the success of its future tourism and hospitality markets, the report found. Domestic tourism is "thriving", with 65 per cent of Saudi Arabians already travelling within the kingdom between one and three times a month.

They travel for short business trips (16 per cent), entertainment or seasonal attractions (12 per cent) and religious pilgrimages (16 per cent), the data showed.

"Saudi Arabia is on the cusp of becoming one of the world’s major tourist markets," said Turab Saleem, Knight Frank's head of hospitality in Saudi Arabia.

"The key to achieving this goal lies in catering to the diverse accommodation needs of the domestic tourists including the younger generation. Furthermore, supporting hospitality infrastructure, such as new airports and national airlines, both of which are coming, combined with a legislative framework that eases access to the sector for international investors will be critical.”

The kingdom aims to become a global transport and logistics hub and promote itself as a tourism destination.

Last month, the Arab world's largest economy announced plans for new carrier Riyadh Air and the new King Salman International Airport as part of its aviation strategy.

The ambition is to triple annual passenger traffic to 330 million by 2030 and boost the number of destinations to 250 from 99 at present, backed by $100 billion in investments from the government and private sector.

Within the total hotel supply planned for 2030, 56 per cent is by international brands, 41 per cent by local brands and 3 per cent unbranded, according to Knight Frank.

The total hotel development costs of non-giga projects is $21.3 billion, with the highest cost of $11 billion in five-star properties.

There is a need for a variety of options in hotel accommodation in the kingdom and the rapid expansion of hospitality-linked offerings across the country will play a critical role in boosting domestic tourism, Knight Frank said.

Some 58 per cent of Saudi Arabians surveyed in the report choose not to stay in hotels.

“The prevalence of large families travelling together may clearly be a factor, but so is cost, quality and location," said Faisal Durrani, partner and head of Middle East research at Knight Frank.

"Just 17 per cent of the planned hotel supply falls in the three-star or below category, and with 56 per cent of the kingdom’s population aged below 35, the demand for various accommodation types will likely continue to emerge as a significant consideration for the industry."

While the majority of domestic travellers surveyed are accompanied by family (65 per cent), the trend of those travelling with friends (36 per cent) and travelling solo (30 per cent) are also on the rise, the report found.

The Knight Frank survey studied the preferences of Saudi Arabians who will play a "critical role" in unlocking domestic tourism potential.

Some 42 per cent of all respondents prefer to stay in a hotel when travelling around the country. The second-most popular choice is to stay with family or friends (21 per cent), followed by serviced apartments (20 per cent). Resorts and Airbnb properties are "less favourable" mainly because of limited options.

The younger generations, particularly those aged 25 to 35, find restrictions of hotels off-putting. Cost appears to be the least of their concerns, ranking lower than any other group.

Most respondents aged above 45 say hotel rooms are too small and restrictive for their large families.

Internationally branded or operated hotels are preferred by the majority of domestic travellers (56 per cent) over local brands (44 per cent), with the choice linked directly to price and location.

Gen Z, aged 18 to 25, have a bigger appetite to travel domestically — 24 per cent compared to14 per cent for those over 25.

They especially enjoy travelling with friends (46 per cent), but most find it too expensive at the moment and so they prefer to travel with family (73 per cent) instead.

For millennials, aged between 25 and 35, domestic travel centres around entertainment, with exploring the kingdom (39 per cent) emerging as the main travel driver. This group is least concerned about cost and mainly interested in the experience.

Only 14 per cent of millennials said the costs for a holiday in Saudi Arabia are too high.

Among younger Gen X respondents (35 and 45), travelling for work-related reasons is a dominant pattern, with Riyadh and Jeddah their two most popular city destinations.

Accor, Hilton, Marriott International, IHG and Radisson group are the kingdom's top five hotel operators, according to data by Knight Frank and London-based hospitality data firm STR Global.