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Saudi hotel development costs estimated at $38bn

Sindalah Neom
Sindalah is set to be the first luxury Red Sea island destination in Saudi Arabia's $500 billion giga project Neom

The total development cost for all the hotel rooms planned in Saudi Arabia is estimated at $37.8 billion, according to property consultancy Knight Frank.

The Arab world’s largest economy will see the completion of 315,000 hotel keys by 2030, the consultancy said.

The growth in Saudi’s hotel room inventory will swell to become larger than Dubai’s current 140,000 keys, as the country embarks on an expansion drive as part of its diversification strategy.

Faisal Durrani, partner, head of Middle East research, said: “The volume of hotel room keys planned to be delivered in the kingdom by 2030 is nothing short of incredible, with a total likely stock of close to 450,000 hotel rooms.”

The UAE today has a combined total of around 200,000 rooms, so Saudi is gearing up to see nearly 58 percent more than this figure, he added.

The domestic tourism sector is already thriving, with 65 percent of Saudis already traveling within the kingdom between one- and three- times a month.

“What’s fascinating, however, is that 58 percent of Saudis we spoke to as part of our 2023 Saudi Report opt not to stay in hotels.”

Durrani noted that the prevalence of large families traveling together might be a factor, but so are cost, quality and location.

Just 17 percent of the planned hotel supply falls in the 3-star or below category. With 56 percent 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.

“We will need to think broader and incorporate the likes of luxury glamping sites and youth hostels to cater to this increasingly important segment of the market if it is to thrive and flourish, being mindful of the cultural sensitivities and the need for appropriate adaptations,” said Durrani.

The rapid expansion of hospitality-linked offerings across Saudi Arabia is expected to play a critical role in boosting domestic tourism.

Turab Saleem, head of hospitality, Saudi Arabia, at Knight Frank, said 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.