Luxury, upper luxury and upscale hotel rooms are expected to account for 76% of Saudi Arabia's total room inventory by 2030, up from 60% currently, Knight Frank said on February 11.

The shift reflects demand patterns, with 83% of travellers preferring four- or five-star hotels, while demand for lower-rated properties has virtually disappeared, positioning Saudi Arabia as a market defined by high quality and service standards, the London-based real estate consultancy said.

Saudi Arabia currently has 171,600 hotel rooms, with luxury, upper luxury and upscale categories concentrated in Mecca with 40,200 rooms and Riyadh with 18,500 rooms, representing 23% and 10% of total supply respectively.

Serviced apartments ranked as the second most preferred accommodation type after hotels, chosen by 22% of survey participants compared to 20% in 2023, while 11% preferred resorts, up from 9% in 2023.

Knight Frank expects resorts to grow in popularity as the Red Sea project portfolio expands, with around 8,000 hotel rooms expected by 2030.

The survey included 1,037 participants divided into three categories: Saudi citizens with monthly income between SAR10,000 ($2,666) and SAR50,000, Saudi citizens earning above SAR50,000 monthly, and residents earning above SAR30,000 monthly.

Hotel room inventory is expected to expand from the current 171,600 rooms, with 94,500 rooms under construction or in advanced planning stages, following a year when the travel and tourism sector grew 32%.

"Growth in Saudi Arabia's hospitality market is driven by a mix of government initiatives, private sector investment and evolving consumer preferences," said Usama Al Qudairi, partner and head of hospitality, tourism and leisure consulting for the Middle East and North Africa at Knight Frank.

Tourism and entertainment destinations such as the Red Sea, AlUla and Amaala are transforming from plans into operating luxury destinations, he said. The Red Sea's first resorts and international airport have entered operation, forming the first wave of more than 3,000 hotel rooms.

Travel and tourism contributed a record SAR444.3bn ($118.5bn) to the economy in 2024, representing 11.5% of GDP, the highest in the region, according to the World Travel and Tourism Council.

International visitor spending jumped to SAR49.4bn in the first quarter of 2025, up 9.7% year on year, while total tourism spending rose 11% to SAR284bn.

Saudi Arabia received 29.7mn international visitors in 2024, up 8% year on year, alongside 86.2mn domestic tourists, up 5% compared to 2023. Total annual tourism spending reached SAR284bn, with international visitor spending accounting for SAR169bn, showing a 19% increase.

Religious tourism remains a primary driver, with Saudi Arabia receiving 1.8mn pilgrims and 35.7mn Umrah visitors last year. Non-religious international travellers now represent 59% of total international arrivals, compared to 44% in 2019, reflecting a 127% increase. Leisure and holiday tourism alone generated SAR36.4bn in spending in 2024.

Asia was the largest source market for international tourists to Saudi Arabia last year with 9.7mn visitors. Egypt ranked as the largest individual source country with 3.2mn visitors, followed by Pakistan with 2.8mn visitors and Bahrain with 2.6mn visitors.

Average daily room rates across Saudi Arabia rose 0.3% to SAR746 during January to August 2025, while occupancy rates reached 61%, pushing revenue per available room up 1.3%.

Around 358,000 hotel rooms are planned for development across Saudi Arabia, including 94,000 rooms under construction or in advanced planning stages. Riyadh is expected to see a 19% increase in quality rooms to reach 30,300 by 2027.

Domestic travellers accounted for the largest share of tourists, with Saudi citizens representing 74.3% of total visitors in 2024. Around one-third of Saudi citizens and residents travel every two to three months, rising to 50% among those earning above SAR80,000 monthly.

Mecca ranked as the top overall destination at 42%, but for Saudis earning above SAR80,000 monthly, Riyadh came first at 61%. Riyadh and Jeddah each attracted 40% of travellers, reflecting their roles as major gateways and centres for business, entertainment and cultural experiences.