Saudi Hotel Sector Remains Resilient Amid Regional Uncertainty
Domestic tourism and religious pilgrimages support the Kingdom's hospitality industry
Riyadh: Saudi Arabia’s hospitality industry showed resilience in the first quarter of 2026, despite regional geopolitical and economic uncertainty.
Nationwide occupancy reached 66.3 percent with average daily rates increasing by 3 percent to SR805.5 ($215.37).
Although revenue per available room dropped slightly by 1.3 percent, domestic tourism and religious travel provided vital support to the sector during this period, according to JLL.
The holy cities of Makkah and Madinah remained key contributors to stability, recording occupancies of 78.6 percent and 81.3 percent respectively, driven by Umrah demand and Ramadan travel.
These cities continue to be essential for religious pilgrimages in Saudi Arabia, supporting the resilience of the hotel sector.
As part of Saudi Vision 2030, strengthening the real estate and hospitality sectors is a strategic objective for the Kingdom.
This initiative aims to establish Saudi Arabia as a leading tourist and business destination by the end of the decade.
The Real Estate General Authority predicts that the Kingdom's property market will reach $101.62 billion by 2029 with an anticipated compound annual growth rate of 8 percent from 2024.
Saud Alsulaimani, country CEO and head of capital markets at JLL Saudi Arabia stated: "Saudi Arabia’s real estate market is evolving with purpose".
He added that the industrial and logistics sectors are operating near full capacity, highlighting the Kingdom's role as a significant node in regional and global supply chains.
Rental growth in prime office spaces in Riyadh remains strong.
The King Abdullah Financial District led this trend, where prime rents increased by 5.5 percent year-on-year.
Grade A and Grade B offices saw respective increases of 2.1 percent and 5.1 percent.
Jeddah reported a vacancy rate of 6 percent for Grade A office spaces with a decline in rents of 3.8 percent, as tenants moved to newer properties.
The Dammam Metropolitan Area showed signs of improvement with vacancy rates at 21.4 percent (Grade A) and 17.3 percent (Grade B), accompanied by rental growth of 9.2 percent and 8.7 percent respectively.
The industrial and logistics sectors have emerged as significant growth areas, maintaining near-full capacity utilization above 90 percent in key markets.
They also experienced strong rental growth in major cities with increases of 5.1 percent in Riyadh, 5.3 percent in Jeddah, and 9.9 percent in the Dammam Metropolitan Area.
Saudi Arabia’s retail sector delivered robust results during this period, particularly in prime formats across Riyadh and Jeddah.
This growth was driven by factors such as population expansion, increasing tourism arrivals, and rising consumer spending.
Super-regional malls in Riyadh maintained a very low vacancy rate of 2.1 percent while regional and community malls stood at 9.7 percent and 10.4 percent respectively.
JLL noted that despite these positive trends, the near-term retail real estate sector might face challenges due to temporarily reduced business and leisure travel.
The residential sector experienced a sharp contraction in transaction activity across major cities during this quarter.
This downturn was attributed to regional geopolitical tensions, economic uncertainty, and recent regulatory changes.
Riyadh saw a decline of 54.4 percent in residential transactions while Jeddah and Dammam reported declines of 51.8 percent and 18.6 percent respectively.
Nationwide occupancy reached 66.3 percent with average daily rates increasing by 3 percent to SR805.5 ($215.37).
Although revenue per available room dropped slightly by 1.3 percent, domestic tourism and religious travel provided vital support to the sector during this period, according to JLL.
The holy cities of Makkah and Madinah remained key contributors to stability, recording occupancies of 78.6 percent and 81.3 percent respectively, driven by Umrah demand and Ramadan travel.
These cities continue to be essential for religious pilgrimages in Saudi Arabia, supporting the resilience of the hotel sector.
As part of Saudi Vision 2030, strengthening the real estate and hospitality sectors is a strategic objective for the Kingdom.
This initiative aims to establish Saudi Arabia as a leading tourist and business destination by the end of the decade.
The Real Estate General Authority predicts that the Kingdom's property market will reach $101.62 billion by 2029 with an anticipated compound annual growth rate of 8 percent from 2024.
Saud Alsulaimani, country CEO and head of capital markets at JLL Saudi Arabia stated: "Saudi Arabia’s real estate market is evolving with purpose".
He added that the industrial and logistics sectors are operating near full capacity, highlighting the Kingdom's role as a significant node in regional and global supply chains.
Rental growth in prime office spaces in Riyadh remains strong.
The King Abdullah Financial District led this trend, where prime rents increased by 5.5 percent year-on-year.
Grade A and Grade B offices saw respective increases of 2.1 percent and 5.1 percent.
Jeddah reported a vacancy rate of 6 percent for Grade A office spaces with a decline in rents of 3.8 percent, as tenants moved to newer properties.
The Dammam Metropolitan Area showed signs of improvement with vacancy rates at 21.4 percent (Grade A) and 17.3 percent (Grade B), accompanied by rental growth of 9.2 percent and 8.7 percent respectively.
The industrial and logistics sectors have emerged as significant growth areas, maintaining near-full capacity utilization above 90 percent in key markets.
They also experienced strong rental growth in major cities with increases of 5.1 percent in Riyadh, 5.3 percent in Jeddah, and 9.9 percent in the Dammam Metropolitan Area.
Saudi Arabia’s retail sector delivered robust results during this period, particularly in prime formats across Riyadh and Jeddah.
This growth was driven by factors such as population expansion, increasing tourism arrivals, and rising consumer spending.
Super-regional malls in Riyadh maintained a very low vacancy rate of 2.1 percent while regional and community malls stood at 9.7 percent and 10.4 percent respectively.
JLL noted that despite these positive trends, the near-term retail real estate sector might face challenges due to temporarily reduced business and leisure travel.
The residential sector experienced a sharp contraction in transaction activity across major cities during this quarter.
This downturn was attributed to regional geopolitical tensions, economic uncertainty, and recent regulatory changes.
Riyadh saw a decline of 54.4 percent in residential transactions while Jeddah and Dammam reported declines of 51.8 percent and 18.6 percent respectively.
