A wave of development is sweeping across the Middle East, where hospitality and residential projects totalling a staggering $1.9 trillion are currently in the works.

Recent data released in anticipation of the Future Hospitality Summit, scheduled for 25 to 27 September 2023 in Abu Dhabi, reveals that Saudi Arabia, the United Arab Emirates and Egypt together account for 90% of this colossal investment, amounting to $1.7 trillion.

Saudi Arabia takes the lead in project investments

Global independent real estate consultants Knight Frank conducted research, revealing Saudi Arabia as the frontrunner in the region’s project investment landscape.

Saudi Arabia is at the forefront with $1.2 trillion worth of developments in the pipeline, followed by the UAE with $300 billion and Egypt with $200 billion.

This surge underscores the Middle East’s unwavering commitment to achieving its goal of hosting 160 million tourists each year by 2030.

Middle East’s remarkable recovery from the pandemic

Turab Saleem, partner and head of hospitality, tourism and leisure for the Middle East and North Africa region at Knight Frank, remarked on the Middle East’s remarkable rebound from the pandemic, asserting that it was the first global region to achieve a complete business recovery.

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While much of the world still grapples with pandemic-induced challenges, the Middle East is poised to surpass pre-Covid levels in terms of hospitality and tourism-related revenue and employment.

Saleem emphasised that the region’s travel and tourism sector is seeing exceptional growth, with a 46.9% increase in its contribution to GDP in 2023, the highest of any region globally.

This growth is driven by a 14.5% increase in jobs supported by the sector and an increase of more than $107 billion in its overall GDP contribution.

Rising trends in Middle East tourism

Saleem also highlighted how the influx of new hospitality and tourism projects is giving rise to trends that enhance value, efficiency and investment returns.

These trends include simplified visa processes, aggressive marketing campaigns, green initiatives, innovation and technology adoption, increased airline connectivity, personalised guest interactions and the booming holistic health and wellbeing industry.

All of these factors play pivotal roles in the Middle East’s tourism industry’s flourishing success.

Explosive growth in the Middle East’s hospitality sector

Hala Matar Choufany, president for the Middle East, Africa and South Asia at HVS Middle East, commented on the explosive growth of the hospitality sector in the region:

“Over the past 15 years, the region has witnessed exponential growth, with a substantial increase in hotel supply across a range of categories. Quality hotel rooms in the region surged from approximately 100,000 in 2010 to a staggering 540,000 in 2022, accompanied by a growth in occupied room nights from 27 million to 135 million.

An additional 180,000 hotel keys are expected to enter the market over the five years up to 2028, projected to increase occupied room nights to 184 million.”

Government budgets have played a pivotal role in stimulating private investments and attracting direct foreign investments to the region.

The Middle East is consequently expected to outpace other regions, offering attractive financial returns and long-term investment opportunities.

High-profile hospitality transactions on the horizon

Colliers, the global real estate consultancy, reports that a substantial volume of hospitality-related transactions is currently at advanced stages of negotiation.

It is expected that high-profile properties will change hands in the coming months, with notable interest from both regional and international investors, particularly in Dubai and Ras Al Khaimah.

This enthusiasm is driven by strong operating performance in the previous year and the continued enhancement of the UAE as a premier international tourism destination.

Challenges ahead in the global investment landscape

James Wrenn, executive director and head of capital markets for the MENA region at Colliers, notes that global sentiment remains subdued due to high inflation, rising interest rates and looming recession fears, which have impacted investor confidence and reduced activity levels.

“Buyers are now scrutinising transactions more closely, and a gap persists between buyer and seller expectations,” Wrenn added. “In many markets, it is therefore widely accepted that yields will need to soften further and align with interest rates to stabilise pricing.”

Future hospitality summit set to explore investment opportunities

The Future Hospitality Summit, which is set to take place from 25 to 27 September 2023 in Abu Dhabi, will shine a spotlight on hospitality investment and the abundant opportunities within the Middle East’s tourism sector.

The event will feature more than 100 top-level speakers addressing key factors that will shape the industry’s future, under the theme “Focus on Investment.”

The summit is being organised by The Bench and enjoys the support of host sponsors the Abu Dhabi Convention & Exhibition Bureau, Miral and Hilton Abu Dhabi Yas Island.