Saudi Arabia Shifts Focus Towards Affordable Tourism Projects

Saudi Arabia is reportedly realigning its long term tourism strategy to attract a broader range of visitors by developing more affordable accommodation options, addressing concerns that its Vision 2030 is too expensive for most customers.

The Kingdom’s ambitious goal of welcoming up to 150 million+plus international visitors will necessitate an increase in budget-friendly hotels, as current offerings are heavily skewed towards the luxury market (see Neom). This development could not come quickly enough, with costs of staying in certain locations hitting over $300 a night, including the temporary hotel in NEOM operated by Hampton by Hilton.

The Kingdom revised its Vision 2030 tourism targets in October 2023, now aiming to attract 150 million visitors by 2030, an increase from the initial goal of 100 million. The significant increase in the target follows the successful growth in tourism numbers, with Saudi Arabia welcoming over 27 million international tourists in 2023, marking a 56% increase since 2019​

Authorities have acknowledged the issue, pointing out that while high-profile projects like The Red Sea, NEOM, and Diriyah dominate media coverage currently, these luxury developments will represent less than 1% of the total hotel capacity by 2030.

Fahd Hamidaddin, CEO of the STA, told SKIFT during the Arabian Travel Market (ATM) trade show in Dubai, "It’s a fault of our media; our share of voice is going mostly to those flagship 1% projects. Skift’s article was a wake-up call. It is a perception people have, and you rightly captured it."

Nemnna’s understanding is that following the reimagining of the wider Tabuk area, a new push to allow mass market tourism is growing in popularity, with airlines including Riyadh Air and Saudia likely to be the major airlines to support this development in tourism.

Moreover, around 80% of upcoming hotel rooms in Saudi Arabia fall into the luxury and upscale categories, according to Knight Frank’s recent report on the state of the developments.

Out of the 320,000 planned new rooms by 2030, nearly 80,000 could be in Tabuk areaalone, with The Red Sea project expecting 8,000 rooms and 1,000 residences. Diriyah has already signed deals for 42 hotels, many of which are luxury brands.

Hamidaddin noted that these high-end projects, which include brands like Four Seasons, St. Regis, and Langham, will only appeal to around 20% of travelers, possibly even less.

"Do you know the 80-20 rule? That 20% of travelers generate 80% of income. Those are not mass-market travelers. Actually, the reality is it’s not even 20% – it’s 5% of travelers generating 80% of revenues for any top destination," he said.

He continued, "What is the state of Saudi? 80% are mass travelers at mid-income or below... the real business today is far from luxury, and the development of new hotels is absolutely balanced between all the tiers. We know that not more than 20% [of travelers] will be in four- and five-star hotels," he told the magazine.

Closer to Riyadh, the push to develop the Qiddiya site for both local and international tourism is one of the latest big pushes in terms of development for the country, with the Six Flags and Aqua Arabia being the headline visitor sites.

Alternative tourism, such as Airbnb, is also a growing need outside the regular hotel system. Short-term rentals, which can cater to mass-market are also a growing area including the development of new hotel apartments in the Kingdom. Saudi Arabia’s two holy cities of Makkah and Madinah currently lead in this category with over 160,000 listings situated around those cities Jeddah.

It's important to note that this is an independent blog and is not sponsored or endorsed by NEOM, the Saudi government, or any other official Saudi organizations. The views and opinions expressed here are solely my own.

While I strive to discuss NEOM's development objectively based on available information, this blog operates independently without any formal affiliations or financial incentives from the parties involved in the NEOM project. As with any major development, I encourage readers to research NEOM from credible sources and form their own perspectives on the ambitious initiative.