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Interest builds in mid-range Saudi hotels after luxury focus

Saudi Arabia’s emphasis on luxury tourism has provided openings for investors in mid-range hotels, industry specialists said this week Hilton
A concept image of a new Hampton by Hilton hotel in Jeddah. The company is one of several planning more mid-range hotels in the kingdom
  • 320,000 rooms planned by 2030
  • Hilton plans 90 Saudi hotels
  • Opportunity for mid-range growth

Saudi Arabia’s emphasis on luxury hotels has provided openings for investors in the mid-range segment, industry specialists said. 

“Look at the size of the country and what you can do. I work in all 13 regions and you’d be shocked at the untouched areas. It’s not Dubai where it’s all glitzy. They have a culture,” said Turab Saleem, a tourism analyst with real estate consultants Knight Frank. 

Saleem said the trend in international tourism now was for new locations away from the well-trodden traditional centres, some of which are concerned about overtourism – something that’s not a problem in Saudi Arabia . 

“Tourism globally is allowing new destinations to flourish. Only 11 percent of Chinese people have a passport at present to travel. Imagine if that increased to 25 percent alone?” he asked. 

“I cannot walk in Madrid any more – it’s unaffordable, it’s over-populated, the local population doesn’t have space.” 

Tourism is central to Saudi Arabia’s massive development plans, which have been valued at over $1.25 trillion. 

The government hopes religious tourism and a series of giga-project resorts such as The Red Sea, Amaala and Magna will help take tourism’s share of GDP from 4 percent now to 10 percent by 2030

Top global brands say they face pressure from the Public Investment Fund (PIF) to open hotels throughout the country inside all of the major developments. 

Saudi Arabia hotels, Saudi tourism, Saudi Arabia hotels, Saudi Arabia tourismHilton
Hilton is planning 90 new hotels in Saudi Arabia

Saudi expansion plans foresee an additional 320,000 hotel rooms by 2030. Hilton Hotels says it currently has a whopping 90 projects in the pipeline in Saudi Arabia. 

But developers have played down concerns about cannibalisation, arguing that they appeal to different market segments. The Red Sea resorts are mainly aimed at the luxury market, but Magna hopes to attract the world’s ultra-wealthy. 

Andreas Lochner, head of investment management hospitality at Hamburg-based Union Investment Real Estate, also pointed to an untapped market of Chinese tourists. 

“There’s a lot of potential for global travel. For China with a growing middle class, there will be a demand for hotel products. People would like to travel, it is good to understand different cultures,” he told an industry forum in Dubai last week. 

Saudi authorities have outlined a strategy of targeting high GDP countries within six hours flying time of the kingdom, which is located at the nexus of Asia, Africa and Europe. That even includes space tourism, set to become a reality from 2026. 

But Saudi Arabia’s focus on the well-heeled – a general feature of the global travel industry at present – has opened space for operators catering to middle income holidaymakers. 

Most religious tourists to the country – who made up half of 2023’s 27.4 million visitors – aim for cheaper options. The government wants to encourage pilgrims to Mecca and Medina to stay longer and visit other locations. 

“We are targeting the mid-scale, we think there is a huge potential, especially for domestic tourism. For our expansion in the next three years we will have 5,000 to 8,000 rooms,” said Samy Boukhaled, vice president of Saudi Elaf Hotels. 

Lourie Kruger, CFO at Katara Hospitality in Qatar, said this applied to Europe and the Middle East. “I think the mid-market is going to come back. It’s so unloved right now,” he said. “There’s going to be some tactical opportunities in the not-too-distant future.”

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