Saudi Arabia's hotel industry is headed for a new phase of unprecedented growth, with massive plans to expand hotel inventory and meet the growing demand for luxury hotel rooms, amid expectations that the Kingdom will become one of the region's leading tourism and investment destinations.

Hotel industry in Saudi Arabia is headed for a new phase of unprecedented growth, with massive plans to expand hotel inventory and meet the growing demand for luxury hotel rooms.

A recent report by Knight Frank revealed that the Kingdom currently has a hotel inventory of 171.65 thousand rooms, while an additional 94.5 thousand rooms are under construction or in advanced planning stages. The industry is targeting to develop around 358,000 rooms in the near term, increasing the total supply by a projected 18% by 2027. According to the report, Saudi Arabia's hotel performance grew slightly from January to August 2025, with the average daily room rate increasing by 0.3% to SR746 and occupancy reaching 61%, contributing to an increase in revenue per available room by 1.3%.

Hotel performance in Saudi Arabia grew slightly from January to August 2025, with the average daily room rate increasing by 0.3% to SR746 and occupancy reaching 61%.

Supply Distribution by Cities and Major Projects
The report predicts that quality hotel rooms in Riyadh will rise by 19% to reach 30.33k rooms by 2027, while major projects in Mecca and Medina will add more than 252k rooms, with four and five-star categories accounting for 64% of the supply. Makkah remains the leading destination in the Kingdom with 42% of demand, while Riyadh is the top choice for Saudis with monthly incomes above 80,000 riyals with 61%. Riyadh and Jeddah are the top urban destinations with 40% each, while regional destinations such as Abha, Taif, and AlUla are also growing in popularity.

Shift towards luxury and upscale hotels
According to the report, luxury and upscale hotel rooms currently account for 60% of total inventory, with their share expected to rise to 76% by 2030, driven by 83% of travelers' preference for four- and five-star hotels. In contrast, demand for lower categories is clearly limited.

Apartments ranked second in terms of preference with 22%, followed by resorts with 11%, with significant growth expected especially in the Red Sea projects, which are expected to add around 8,000 rooms by 2030, reinforcing the Kingdom's position as an integrated tourism destination combining luxury resorts, modern hotel apartments and luxury hotels.

Red Sea projects are expected to add around 8,000 rooms by 2030, reinforcing the Kingdom's position as an integrated tourism destination combining luxury resorts, modern hotel apartments and luxury hotels.