Saudi Arabia’s Mid-Range Hotel Market Emerges as Prime Investment Opportunity
By Rana Maristani
October 7th 2024
Saudi Arabia is witnessing a surge in interest from investors eyeing the mid-range hotel sector, driven by the kingdom’s strategic shift towards diversifying its tourism portfolio. While luxury tourism remains a focal point, the expanding mid-range segment presents lucrative opportunities for investors and hospitality companies looking to capitalize on Saudi Arabia’s booming travel industry.
Expanding Horizons Beyond Luxury Tourism
Historically, Saudi Arabia has concentrated its tourism efforts on high-end, luxury accommodations, aligning with its ambitious Vision 2030 goals. However, this focus has inadvertently created a significant gap in the mid-range hotel market. Industry experts highlight that the kingdom’s vast and culturally rich landscape offers untapped potential for mid-range hospitality ventures, catering to a broader demographic of travellers seeking quality yet affordable lodging options.
Untapped Potential Across All Regions
“Saudi Arabia’s diverse regions offer a wealth of opportunities for mid-range hotel development,” states Turab Saleem, a tourism analyst with Knight Frank. “Unlike the glitzy landscapes of Dubai, Saudi regions maintain their unique cultural essence, making them attractive destinations for tourists seeking authentic experiences without the overcrowded tourist spots.”
Rising Demand from a Growing Tourist Base
The global tourism landscape is evolving, with travellers increasingly seeking new and less-explored destinations. Saudi Arabia, with its rich cultural heritage and strategic location, is well-positioned to attract this wave of tourism. “With only 11 percent of the Chinese population currently holding passports, there is immense potential for growth. Even a modest increase to 25 per cent would significantly boost tourist numbers,” Saleem adds.
Strategic Government Initiatives
Saudi Arabia’s government is actively promoting tourism as a cornerstone of its economic diversification strategy, with investments exceeding $1.25 trillion aimed at developing world-class tourism infrastructure. Key projects like The Red Sea, Amaala, and Magna are set to transform the kingdom into a premier global tourism hub, targeting a rise in tourism’s contribution to GDP from 4 per cent to 10 per cent by 2030.
Major Hotel Brands Expanding Their Footprint
Global hospitality giants are responding to the massive demand by expanding their presence in Saudi Arabia. Hilton, for instance, has announced plans to develop 90 new hotels across the kingdom, contributing to the projection of an additional 320,000 hotel rooms by 2030. These developments are strategically spread across various regions to cater to different market segments without overlapping with luxury-focused resorts.
Addressing Market Segmentation and Cannibalization Concerns
While some may worry about market cannibalization, developers emphasize that mid-range hotels and luxury resorts serve distinct customer bases. The Red Sea resorts target affluent travellers, whereas mid-range hotels aim to attract a wider audience, including middle-income tourists and religious pilgrims seeking affordable accommodation options.
Capitalizing on the Chinese Tourism Boom
Andreas Lochner, Head of Investment Management Hospitality at Union Investment Real Estate, highlights the untapped market potential among Chinese tourists. “With China’s huge middle class, there is a growing demand for quality hotel accommodations. Saudi Arabia’s strategic location at the crossroads of Asia, Africa, and Europe further enhances its appeal as a prime destination for global travellers.”
Strategic Targeting of High-GDP Countries
Saudi authorities have devised a comprehensive strategy to attract tourists from high-GDP countries within a six-hour flight radius. This approach capitalises on Saudi Arabia’s geographic advantage, making it an accessible and attractive destination for travellers from Asia, Africa, and Europe. Additionally, the kingdom is pioneering space tourism initiatives, set to launch by 2026, further diversifying its tourism offerings.
Catering to the Middle-Income Traveler
The global travel industry’s current emphasis on luxury has created a unique opening for mid-range operators. In Saudi Arabia, half of the 27.4 million visitors in 2023 were religious tourists who predominantly seek budget-friendly accommodation. The government aims to encourage these pilgrims to extend their stays and explore other regions, driving demand for mid-range hotels.
Future Expansion Plans
“We are focusing on the mid-scale segment, which we believe holds tremendous potential, especially for domestic tourism,” says Samy Boukhaled, Vice President of Saudi Elaf Hotels. “Our expansion plans for the next three years include adding 5,000 to 8,000 rooms, meeting the growing demand for quality yet affordable lodging.”
Renewed Focus on the Mid-Market Segment
Lourie Kruger, CFO at Katara Hospitality in Qatar, echoes the sentiment that the mid-market segment is prepared for a resurgence. “The mid-market is currently underserved, presenting tactical opportunities for investors. As the demand for balanced quality and affordability grows, mid-range hotels will play a crucial role in Saudi Arabia’s tourism ecosystem.”
Partner with R Consultancy Group for Optimal Investment Opportunities
Navigating the dynamic landscape of Saudi Arabia’s mid-range hotel market requires expert guidance and strategic insight. R Consultancy Group specializes in identifying and facilitating prime investment opportunities in the region. Our extensive network and in-depth market knowledge ensure that investors and hospitality companies can effectively capitalize on Saudi Arabia’s thriving tourism sector.
For investors looking to explore the lucrative mid-range hotel opportunities in Saudi Arabia, R Consultancy Group is your trusted partner. Contact us today to discover how we can help you secure the best investment prospects and contribute to Saudi Arabia’s vibrant and sustainable tourism future.
Contact R Consultancy Group Today
Unlock the potential of Saudi Arabia’s mid-range hotel market with the expertise of R Consultancy Group. Reach out to us to explore investment opportunities and partner with industry leaders driving the kingdom’s tourism growth.
Email: info@rconsultancy.co.uk | Phone: + +971 58 525 2045 - +447956113330
Website: www.rconsultancy.co.uk
