USD 1 trillion KSA development pipeline reinforces Vision 2030’s ambitious goals, experts say

Dubai, UAE - More than USD1 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, 7-9 May 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.

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 USD500 Billion NEOM. The USD1 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 USD110 billion. Turab Saleem, Head of Tourism and Hospitality at Knight Frank

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.

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. Hala Matar Choufany, President – Middle East, Africa and South Asia at HVS

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 USD21.3 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.

Organised by The Bench, FHS Saudi Arabia will bring together the industry leaders from across the region – and beyond – for discussions, deals and insight on the continued growth of the Kingdom’s hospitality and tourism sectors. Six months later, the Future Hospitality Summit will take place in Abu Dhabi, UAE, for the first time. The event will be hosted at the Hilton Abu Dhabi Yas Island, 25-27 September 2023. For more information on the 2023 editions of FHS please visit https://www.futurehospitalitysummit.com/.

About The Bench

The Bench is a leading organiser behind some of the most influential investment event brands across Europe, Africa, the Middle East, and Latin America. The company is renowned for guiding businesses towards investments, connections and insights that shape the future of their industries. Known for crafting events with significant economic impact since 1996, The Bench's event participants include government leaders, tourism ministries, global travel and tourism associations, leading hospitality brands, hotel owners and investors, top restaurant groups, airlines and aviation authorities, destination developers, asset managers, financial groups, and consultants. These stakeholders participate to achieve their specific goals, leveraging platforms such as AHIC, now known as FHS World, FHS Saudi Arabia, AHIF, IDEEA, and AviaDev. The Bench's events serve as pivotal venues for industry leaders to exhibit their brands, establish themselves as thought leaders or innovators, and forge connections with valuable opportunities and insights.

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About FHS Saudi Arabia

Dates: 29 April – 1 May 2024

Location: Al Faisaliah Hotel, Riyadh, KSA

Sponsors:

Al Khozama Investment and Mandarin Oriental Al Faisaliah, Riyadh as Host Sponsors; Ministry of Tourism as Strategic Partner; Taiba Investments as Founding Partner; Tourism Development Fund as Enablement Partner; Baheej, Boutique Group, Hilton, Kerten Hospitality, KAFD, NEOM, Radisson Hotel Group, Red Sea Global, Rua Al Madinah Holding and Saudi Icon Company as Platinum Sponsors; Saudi Tourism Investment Company (ASFAR), Accor, Club Med, IHG Hotels & Resorts, Jabal Omar Development Company, Marriott International, Millennium Hotels and Resorts and Rotana as Emerald Sponsors; Aleph Hospitality; ARC, Al Futtaim Engineering & Technologies, Bits Arabia, CBRE, Colliers; Compass Project Consulting, Dan Company, DAR Engineering, Daniel Ost, Domus Managed Housing, ELAF, Hyatt, IHCL, Inhabitr, Insignia, JLL, JT & Partners, Kohler, Knight Frank, LEVA, Louvre Hotels Group, Minor Hotels, PwC, QUO, Rove Hotels, Shaza Hotels, Soho Hospitality, Tashyid Urban Development, The Ascott Limited, Valor Hospitality Partners, Whitewater and Wyndham Hotels & Resorts as Gold Sponsors; Conran Design Group, H World International, HVS, HMH Hospitality Management Holding, Keane, STR, TV5 Monde, Time Hotels, Voltere by egis and Wisefields as Silver Sponsors; MJS, Restroworks and TGP International as GRIF - Platinum Sponsors; Foresite Creative as GRIF-Data Partner; Abuchu and Matbakhi as Start-up Exhibitors; Nimplebot, Sparklehaze, ViaVii and Exnios Academy as UN Tourism Innovation Sponsors; Cool Inc and Livit as GRIF's Culinary & Concept Tour Partners; Melitta Professional as Coffee Sponsor, and HAMA, Sustainable Hospitality Alliance and UN Tourism as Supporters.

Anne Bleeker
In2 Consulting
+971 56 603 0886
The Bench