More than US$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, May 7-9, 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 per cent 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.
KSA 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 KSA 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 US$1 trillion projects already under way 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 KSA 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 US$110 billion.”
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 – Middle East, Africa and South Asia at HVS, said: “The surge in tourism and arrivals into KSA 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 KSA 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 per cent 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 US$21.3 billion. Meanwhile, the Kingdom’s giga projects represent nearly 73 per cent of the hotel supply pipeline, with a 62 per cent surge in the number of 4- and 5-star hotel rooms by the end of the decade.
And Saudi Arabia’s tourism expansion is not limited to land-based destinations and attractions. 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, according to the KSA Public Investment Fund.
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, USD110 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 product in the right locations. Delivering as per the plan will create a number of 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 KSA’s hospitality development strategy.”
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 not only a room but 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 in 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.”
