GCC Hospitality Sector: Impressive Growth Supported by Strategic Investments
The Hospitality sector in the Gulf Cooperation Council (GCC) region is experiencing a robust recovery, surpassing pre-pandemic levels, and setting the stage for sustained growth. In our latest report on the GCC Hospitality sector, we give an in-depth analysis of these trends.
Strong Post-Pandemic Recovery
Key destinations such as the UAE and Saudi Arabia have not only recovered but exceeded their pre-pandemic visitor numbers. In 2023, the UAE and Saudi Arabia reported 28.15 million and 27.4 million international visitors respectively, achieving their highest ever international tourist arrivals.
The economic impact of this is evident in the notable increase in travel and tourism spending. As the most popular destinations, the UAE and Saudi Arabia account for over 72% of total travel and tourist spending within the region, with Saudi Arabia surpassing the UAE in 2022.
Infrastructure development has been pivotal in accommodating the rising tourist inflow. From 2017 to 2022, room capacity in the GCC grew at a CAGR of 4.5%, with Saudi Arabia comprising 67% of the total hotel rooms and the UAE maintaining around 21%. Key performance indicators such as occupancy rates, Average Daily Rate (ADR), and Revenue Per Available Room (RevPAR) have shown strong recovery, with ADR increasing from US$155 in 2019 to US$163 in 2022.
Robust Growth Outlook
Looking ahead, the GCC Hospitality sector's revenues are expected to grow at a 7.5% CAGR between 2023 and 2028, reaching US$48.1 billion. Saudi Arabia is projected to maintain a dominant 70% market share, followed by the UAE at around 21%. Smaller markets such as Qatar, Bahrain, Oman, and Kuwait are anticipated to experience high rates of growth in their hospitality sector revenues. Room capacity across the region is expected to grow at 4% between 2023 and 2028.
Key Growth Drivers
A combination of country and regional level initiatives is likely to drive this growth:
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Strong economic growth
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Hosting mega MICE and sporting events
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Regional tourism strategies
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Implementation of eased visa regulations
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Religious tourism
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Infrastructure development
Strong economic growth:
According to the IMF, the GCC economy is projected to grow at 2.4% in 2024 and 4.9% in 2025, driven by robust growth in the Non-Hydrocarbon sector. The non-oil GDP is expected to maintain growth rates of 3.6% in 2024 and 4.5% in 2025. This economic expansion, fueled by increased domestic demand and gross capital inflow, will positively impact the Hospitality sector.
Hosting mega MICE and sporting events:
The GCC has established itself as a global tourism hub by hosting major MICE, cultural, and sporting events that attract millions of visitors. Examples include the FIFA World Cup 2022 in Qatar, which drew over one million visitors, and the upcoming FIFA World Cup 2034 in Saudi Arabia. Since Bahrain held the first Grand Prix in the GCC in 2004, the region’s calendar has extended to host 4 of the 24 Grand Prix events. These mega events are crucial for driving tourism and boosting hotel occupancy rates across the GCC.
Religious tourism:
Religious tourism plays a significant role, particularly for Saudi Arabia. The Kingdom, home to Islam's two holiest sites, Mecca and Medina, attracts millions of pilgrims annually. The country aims to host 30 million pilgrims annually by 2030 as part of its Vision 2030 strategy. Other GCC countries, such as the UAE with its Grand Mosque in Abu Dhabi, are also promoting religious tourism to diversify their visitor base.
Implementation of eased visa regulations:
GCC countries have been implementing more relaxed visa policies. For example, Saudi Arabia now offers instant e-visa options, while Dubai has introduced a five-year multiple-entry visa. Notably, the GCC's Unified Tourism Strategy includes plans for a unified visa system across the member states, allowing international travelers to visit and explore multiple destinations in the region.
Infrastructure development: GCC countries are improving their transport infrastructure to meet the region's growing tourist population by expanding airport capacity or building new airports across the region. Significant focus is also being placed on developing land transportation, like roads, and the UAE’s Etihad Rail Project, which upon completion, will connect all the seven emirates of the UAE. Additional investment is being made developing tourist attractions such as museums, theme parks, and cultural sites to enhance visitor experiences and diversify tourism offering.
Aside from these growth drivers, sustainability has become a trend in the GCC's Hospitality industry. Increased awareness has spurred demand for eco-friendly hotels that integrate renewable energy solutions and sustainable practices. In addition, new areas of tourism such as Health and Wellness, and Adventure Tourism are driving growth, along with an increase in domestic tourism and digitalization.
Challenges and Opportunities
Despite its promising outlook, the GCC Hospitality sector faces several challenges. Global economic uncertainties, inflation concerns, and geopolitical tensions could impact consumer confidence and spending. Additionally, the sector grapples with a shortage of skilled workers, which could hinder its growth trajectory.
Nevertheless, the GCC Hospitality sector demonstrates remarkable resilience and growth potential, driven by economic diversification, government initiatives, mega-events, and infrastructure investments. The region's commitment to innovation, sustainability, and strategic development positions it for continued success in the global tourism market.
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