Saudi Tourism Expands but Hotels Face a Tougher Pricing Fight

Saudi Arabia is expanding its tourism sector quickly, but new hotel data shows that fast growth is starting to create pricing pressure.

The country added a large number of hospitality properties in 2025, while average hotel room rates fell sharply over the same period.

Visitor numbers are still rising, hotel occupancy has improved slightly, and guests are staying longer. The hotel market is becoming more competitive as more properties open across the country.

Saudi Arabia added hospitality capacity at a rapid pace

According to Saudi Arabia’s General Authority for Statistics, the Kingdom had 5,937 licensed hospitality facilities in the fourth quarter of 2025, up 34.2 percent from a year earlier.

That total included 2,847 hotels and 3,090 other hospitality properties, such as serviced apartments. These apartments are fully furnished units for short or extended stays and often include hotel-style services.

This rapid expansion is part of Vision 2030, Saudi Arabia’s plan to grow tourism and reduce the economy’s reliance on oil. The government wants tourism to become a larger source of jobs, investment, and visitor spending over the next several years.

Demand is still growing, but hotels are earning less per room

The biggest shift in the new data is in pricing. Average daily hotel rates fell from SAR 440 (US$117.33) in the fourth quarter of 2024 to SAR 389 (US$103.73) in the same quarter of 2025, a decline of 11.7 percent.

At the same time, demand indicators improved slightly. Hotel occupancy rose from 56.0 percent to 57.3 percent, while the average hotel stay increased from 3.6 nights to 3.8 nights.

Saudi Arabia also recorded 122 million domestic and international visitors in 2025, up 5 percent year over year.

Tourism is becoming more important to the economy

Saudi Arabia says tourism now accounts for 5 percent of GDP, and the government wants that figure to reach 10 percent by 2030. Its wider goal is to attract 150 million annual travelers by the end of the decade.

The sector also supports about 1.03 million workers. But the workforce is still heavily dependent on foreign labor, which accounts for 76 percent of tourism employment. Saudi Arabia aims to raise local participation in the sector to 50 percent by 2028.

Women currently account for 13.3 percent of the tourism workforce. It is a notable increase from earlier years and shows how the sector is changing as it expands.

Saudi Arabia’s tourism push is still strong, but the market is getting more competitive

Rapid hotel growth is exposing gaps in Saudi Arabia’s lodging mix

A similar pattern is visible elsewhere in Saudi Arabia’s hospitality push, where rapid expansion is starting to expose gaps between headline tourism growth and the kinds of rooms the market actually needs.

That was clear recently when a new US-Saudi venture announced plans to open 50 business-focused hotels across the Kingdom, underlining that Saudi Arabia is still adding supply quickly, but is also having to adjust to where demand is strongest and which hotel segments remain underserved.

Photo by mohammed alorabi on Unsplash