Saudi Arabia and the UAE are competing for what they hope is the top spot in international tourism destinations. The race only gets more luxurious as new projects debut in their hotel pipelines. But will all the speculative building result in a glut of rooms?
Hotel development in the Middle East is heating up as investors regain confidence in the region, and it’s a competition between who is more luxurious.
In February, for example, multi-project developer Red Sea Global announced its plans for building Clinique La Prairie Health Resort, a health and wellness-focused establishment in partnership with Swiss longevity clinic Clinique La Prairie. Red Sea Global is wholly owned by the Public Investment Fund of Saudi Arabia.
The development is part of Red Sea Global’s megaproject AMAALA, which is an upcoming ultra-luxury tourism destination being developed along the Red Sea coast in northwestern Saudi Arabia. Upon its completion in 2027, AMAALA will span over 4,000 square kilometers and be home to 25 hotels and approximately 900 luxury residential villas, apartments and estate homes. The first phase of development is expected to wrap up in mid-2024 and welcome guests to over 1,300 hotel rooms across eight resorts. Clinique La Prairie Amaala will be one of the eight.
“At Amaala, we are creating the most important health and longevity-focused resort ever developed. We’re delighted to be building our very first full-scale destination in such an extraordinary setting and to help bring Red Sea Global’s vision of regenerative, ultra-luxury tourism to life,” said Simone Gibertoni, CEO of Clinique La Prairie.
But as cranes fill the skylines above the arid landscapes, the mad development rush doesn’t come without its risks. Hotels created from the rapid expansion may face occupation challenges if tourism interest does not match up. Doha was left with a glut of empty rooms at the end of 2022 after the World Cup ended and fans left the country, which questions whether the race to develop will see its return on investment as it supposes.
Still, the Middle East saw a record number of new hotels open in the fourth quarter last year, ending 2022 with 81 new openings to account for 17,736 rooms. The upward trend continues as new project announcements increased 56 percent year over year.
Large multinational chains like Hilton, Marriott International, Accor and InterContinental Hotels Group (IHG) are also competing in the race. Hilton leads the pack with a record of 99 projects in the region, followed by Marriott with 77 projects, Accor with 74 projects, and IHG with 63 projects.
Saudi Arabia tops all other countries in the Middle East with the most ambitious hotel construction pipeline. According to the Middle East Construction Pipeline Trend Report from Lodging Econometrics, the three cities with the largest number of projects under construction are all in Saudi Arabia–Provincial leading with 96 projects, Riyadh with 73 projects and Jeddah with 46 projects. Doha, Qatar and Cairo, Egypt follow with their respective numbers in the pipeline. Approximately 54 percent of projects and 45 percent of rooms under construction in the Middle East can be found within these five cities.
In addition to AMAALA, U.S.-based Collective Retreats is partnering with NEOM, a $500 billion megaproject to open a retreat in Trojena, Saudi Arabia. The project, named Collective Trojena, will be built with a mountainous backdrop, also taking place in the northwestern part of the kingdom. NEOM will be hosting the 2029 Asian Winter Games.
Expanding the tourism sector is part of the Saudi Arabian government’s plans to diversify its oil-dependent economy. With the goal of achieving 100 million annual visitors by 2030, the country is investing $1 trillion in various hospitality experiences throughout the current decade for luxury projects like AMAALA. It is hoping to outdo Dubai, which has a target of reaching 40 million hotel guests by 2031.
The United Arab Emirates (UAE) ranks second in the number of hotels under construction after Saudi Arabia, with 104 projects in the pipeline as of fourth quarter 2022. Its most popular travel destination, Dubai, saw 14.36 million international overnight visitors in 2022, edging closer to the 16.73 million figure in 2019.
The city of skyscrapers celebrated its new icon, the $1.1 billion Atlantis The Royal, with a $100 million party and paid Beyonce $24 million to perform at the grand opening in January this year. Ruler of Dubai, Sheikh Mohammed bin Rashid, said in a statement that UAE has ambitious growth targets to “strengthen the country’s status as the world’s most popular destination for international tourists,” adding that “as part of [their] efforts to create a fertile ground for investors, [they] are keen to foster new growth opportunities in the tourism sector.”
Joining the branded hotel scene is Dubai-based Aleph Hospitality, who signed an exclusive contract with the French contemporary gastronomy leader, Fauchon Hospitality, to develop and operate the brand’s luxury hotels in the Middle East and Africa. The portfolio will focus on cosmopolitan cities and luxury leisure destinations to feature gourmet bars, artisan experiences and Fauchon beauty spas. Aleph Hospitality targets 50 hotels in the region by 2026.
Lodging Econometrics forecasts 123 new openings in 2023, and anticipates the number to slightly decrease to 116 in 2024.
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Photo credit: Amaala unveils first hotel brand with focus on luxury and longevity. Source: Red Sea Global Red Sea Global