The hospitality sector across the GCC has experienced impressive growth in occupancy levels and average daily room rates (ADR) over the last few years, supported in big part by strategic government initiatives and substantial investments in tourism, leisure, hospitality and aviation infrastructure. Dubai has been a standout performer, emerging as the third most visited city in the world during 2023, with 17.2 million visitors to the city’s 154,000 hotel rooms. This momentum has been sustained during H1, with a further 9.3 million tourists arriving in the city, representing an increase of 9% on H1 2023.
Not to be outdone, Saudi Arabia emerged as the world’s 13th most visited country during 2023, with 27.4 million visitors, just behind the UAE (28.2 million visitors).
Overall, the travel & tourism sector injected a US$ 223.4bn to the GCC’s GDP, underpinned by the 76.2 million tourist arrivals to the region, who together spent US$ 135.5bn, up 45.3% on 2022.
The sector plays a pivotal role in many of the GCC’s transformation and vision programs such as Vision 2030 in Saudi Arabia, which is forecasting 150 million visitors to the Kingdom by 2030 and Dubai Economic Agenda (D33) in the UAE.
Faisal Durrani, Partner – Head of research, MENA.
Faisal Durrani, Partner – Head of research, MENA, added: “The synergy between a robust economy and a dynamic, vibrant hospitality and tourism sector is evident across the region as the GCC states collectively pursue an economic future that is far less reliant on oil than it is today. The UAE and Dubai, in particular, has blazed a trail in this regard with the travel and tourism sector now accounting for around 11.7% of UAE’s economy, proving not only that it can be done, but creating a blueprint for other markets in the region to build on and adapt”.
Despite almost uniform national efforts by GCC governments, there have been disparities in the performance of the region’s hospitality sectors, according to Knight Frank.
Citing STR data, Knight Frank says that between January and May 2024, the UAE emerged as a standout performer, with an average hotel occupancy rate of 80% – the highest level in the region. This figure was matched by RevPAR levels of US$ 155. As of the end of H1 2024, the UAE remains the largest hospitality market in the GCC, with current hotel stock standing at 212,000 quality hotel rooms, 154,000 of which are in Dubai alone. Assuming the planned completion of ongoing construction, Knight Frank expects this supply to increase by 10% to 232,000 keys by 2026.
Meanwhile Saudi Arabia recorded an ADR of US$ 198 and a revenue per available room (RevPAR) of US$ 127, despite a more modest average occupancy rate of 64%. As of the end of June, the Kingdom’s current hotel stock stood at 159,790 quality hotel rooms. With ongoing construction, Knight Frank is forecasting this supply to rise by 29% to 205,500 by 2026, assuming projects are completed as planned. Riyadh alone is poised to experience a 46% increase in quality hotel rooms to 32,500 by 2026.
Elsewhere, the tourism sector in Qatar continues to show promising growth, following the successful hosting of the world’s largest soccer event and witnessing a remarkable 58% surge in visitor numbers to 4 million in 2023, compared 2.6 million in 2022 (PSA). Notably, 28% of these visitor’s hail from other GCC countries, Knight Frank points out.
As a result of the increased influx of tourists, the hotel performance indicators in Qatar have improved steadily between January and May this year. The ADR increased by 8.3% to US$ 127, while average occupancy levels increased by 33% to 70%. As a result, RevPAR grew by 44% to US$ 90 (STR).
Turab Saleem, Partner and Head of Hospitality, Tourism & Leisure Advisory, MEA, says: “Tourism and hospitality has emerged as a pivotal sector in the region, contributing to job creation, fostering international collaboration, and enhancing the global profile of the GCC. Notably, in 2023, the travel and tourism sector supported over 2.6 million jobs across the region, underpinned by a total of 464,465 hotel rooms.”
Kuwait, Knight Frank says, faces challenges with the GCC’s lowest occupancy rate (42%), despite having the second highest ADR of $197 in the region. Around 200+ hotel keys were added to Kuwait’s total quality stock of around 10,300 rooms, with no additional rooms due to be completed this year. The quality room supply in Kuwait is expected to reach 10,770 keys by the end of 2026.
In Bahrain the hospitality sector has shown resilience and growth. From January to May this year the ADR increased by 7.1% to US$ 181, while average occupancy levels rose by 2% to 54%. Consequently, the RevPAR grew by 11.3% to US$ 98 (STR), signalling a robust recovery and promising future for Bahrain’s tourism sector.
The overall hotel room supply has continued to expand, with current figures showing approximately 19,000 quality room keys available, a slight increase over previous years. By the end of 2026, the quality room supply in Bahrain is expected to reach 20,600 keys.
Supporting the growth of the hospitality sector across the GCC has been the rapid rise of the cruise industry as the Middle East establishes itself as a burgeoning tourism hub, marked by the inauguration of new cruise ship terminals across UAE, Oman, Qatar, and Saudi Arabia. Having hit a total revenue of US$ 200 million last year, the projected cruise industry growth in the GCC is forecast grow by 9.9% per year for the next five years.
According to Knight Frank, GCC’s current hotel stock stood at 464,465 quality rooms as of the end of June 2024, of which 46% (212,000 keys) are in the UAE and 34% (159,800 keys) are in Saudi Arabia. With ongoing construction, this supply is expected to increase by 17% to 544,250 by 2026, assuming projects are completed as planned.
Knight Frank’s analysis also reveals that the Accor Hotel Group will be a leading hotel operator in the GCC region with 55,335 existing rooms under management and a further 11,436 keys planned. Marriott International with 49,623 existing rooms and 10,722 rooms in the pipeline set to complete by 2026, follows in second place.
Future outlook
The large promotion of world-class cultural and entertainment offerings planned across the region is expected to play a critical role in attracting international and domestic tourists to the GCC, helping to reshape the regions hospitality landscape.
Amar Hussain – Associate Partner, Research, ME, concluded:“The scale of the GCC region’s tourism ambitions is further amplified when we consider the mega events set to be held across the Gulf. Riyadh, for instance, winning the bid to host the 2030 World Expo is expected to inject an economic boost of US$ 94.6 billion into the nation’s capital, with an estimated 40 million visitors expected during the six-month exhibition. In addition, Saudi Arabia is the sole bidder for the 2034 FIFA World Cup, while also being the host nation for the 2029 Asian Winter Games”.
Tags: Knight Frank, GCC Hospitality Market Review, Amar Hussain, Turab Saleem, Kuwait, Qatar, Bahrain, Saudi Arabia Faisal Durrani
