Regional conflict fails to dampen tourism demand in Makkah and Madinah

• 105,225 hotel rooms are under construction or in advanced planning stages across Saudi Arabia.
• US$ 178bn contributed by travel and tourism to Saudi Arabia's GDP in 2025.
• 1.71 million pilgrims performed Hajj in 2026, while the Kingdom targets 30 million Hajj and Umrah pilgrims annually by 2030.
• 218,000 hotel rooms, branded residences and serviced apartments are planned across major developments in Makkah and Madinah.

Riyadh | 21 June 2026: Saudi Arabia's hospitality sector continues to demonstrate resilience despite the regional conflict that has weighed on international travel activity across parts of the Middle East, according to Knight Frank’s 2026 Saudi hospitality and religious tourism report.

Supported by strong domestic tourism demand, growing religious tourism activity and a development pipeline of more than 105,000 hotel rooms, the Kingdom remains firmly on track to achieve its long-term tourism ambitions, Knight Frank says. The Kingdom's existing hotel inventory currently stands at 176,260 rooms, of which 35% are classified as luxury and upper-upscale. Once completed, the current development pipeline will increase Saudi Arabia's hotel inventory to more than 281,500 rooms by 2030.

Saudi Arabia's tourism sector continues to be a major contributor to economic growth. The travel and tourism sector contributed US$ 178bn to Saudi Arabia's GDP in 2025 and accounted for approximately 46% of the Middle East's total tourism economy. Tourism GDP expanded by 7.4% during the year, outperforming both the regional average of 5.3% and the global average of 4.1% (WTTC).

During Q1 2026, Saudi Arabia welcomed 37.2 million domestic and international visitors, while total visitor spending reached SAR 82.7bn. Domestic tourism remained the key growth driver, with domestic visitor numbers increasing by 16% year-on-year to 28.9 million and spending rising by 8% to SAR 34.7bn.

Faisal Durrani, Partner – Head of Research, MENA, explained: "While investor confidence in Saudi Arabia's hospitality sector remains exceptionally strong, the market is entering a new phase where product diversification will become increasingly important. More than half of the future hotel pipeline is concentrated in the luxury and upper-upscale segments, highlighting the need for a concerted effort to deliver more affordable hotel accommodation options, particularly given that domestic travellers form the backbone of demand and have budgets that sit well below current average daily room rates in most major cities.

“And with a significant share of future demand growth expected to continue coming from domestic travellers, regional visitors and religious tourists, many of whom require more affordable accommodation options, a focus on the mid-scale and budget hotel offering will help to support occupancy levels while broadening the Kingdom's tourism appeal and target of facilitating 150 million ‘visits’ by 2030."

While regional travel disruptions have weighed on parts of the hospitality sector during the first four months of 2026, market fundamentals remain healthy, notes Knight Frank. National hotel occupancy averaged 63.4% between January and April, while ADR stood at SAR 754 and RevPAR reached SAR 478.

Performance varied across the Kingdom's major destinations. Makkah remained the strongest-performing hospitality market, recording ADR of SAR 775 and RevPAR growth of 4.7% year-on-year, supported by sustained demand from pilgrims. Madinah also continued to demonstrate resilience, with occupancy levels averaging 76% and ADR increasing by 2.7% year-on-year.

Oussama El Kadiri, Partner – Head of Hospitality, Tourism & Leisure Advisory, MENA, said: “Riyadh's hospitality market stands in contrast to the high-performing markets in the Holy Cities. The capital’s hotels are experiencing a phase of normalisation as significant volumes of new hotel supply continue to be delivered and business travel declines due to the ongoing regional conflict, which has exacerbated the slowdown recorded over the last 12-months. The regional conflict has disrupted flight operations and weighed on travel sentiment across the Middle East, contributing to lower international visitor volumes, resulting in softer tourism spending during the first quarter of the year. As a result, the occupancy declined by 17.9% to 49.3% during the first four months of 2026, RevPAR declined by 18.3% year-on-year as operators adjusted pricing strategies in response to growing competition and weaker market conditions. Despite these near-term challenges, Riyadh's long-term outlook remains positive, supported by continued government spending, a long-term expectation of rising business travel demand and a strong pipeline of international events”.

RELIGIOUS TOURISM CONTINUES TO UNDERPIN DEMAND

Religious tourism remains a cornerstone of Saudi Arabia's tourism strategy and hospitality market. The Kingdom welcomed 1.71 million Hajj pilgrims in 2026, representing a 2.2% increase compared with the previous year. Pilgrims from 165 nationalities participated in Hajj, highlighting Saudi Arabia's position as the world's leading religious tourism destination.

International pilgrims accounted for approximately 1.55 million Hajj visitors in 2026, with Indonesia, Pakistan, India, Bangladesh and Nigeria remaining the largest source markets.

The growth in pilgrimage volumes is being supported by substantial investment across the Holy Cities. Knight Frank's analysis shows that more than 218,000 hotel rooms, branded residences and serviced apartments are planned across major developments in Makkah and Madinah, including Rua Al Haram, Rua Al Madina, Dar Al Hijrah Pilgrim City, Knowledge Economic City, Masar Makkah and Thakher Makkah.

The recently introduced foreign ownership reforms are expected to further support investment in the Holy Cities by broadening access to international capital and enhancing the attractiveness of Makkah and Madinah as long-term real estate investment destinations.

El Kadiri added: "Religious tourism continues to be one of the most powerful drivers of hospitality demand in Saudi Arabia. The scale of planned investment across Makkah and Madinah reflects the Kingdom's commitment to enhancing the pilgrim experience while increasing capacity to accommodate rising visitor numbers. These projects will play a critical role in supporting Saudi Arabia's ambition to welcome 30 million Hajj and Umrah pilgrims annually by 2030."

Continued investment in aviation infrastructure and connectivity is also supporting tourism growth. The launch of Riyadh Air’s operations, ongoing airport expansion programmes nationally and subsequent improvements to international connectivity are expected to further strengthen visitor arrivals and support the Kingdom's ambition to become a leading global tourism destination.

Amar Hussain, Associate Partner – Research, MENA, added: "Saudi Arabia's hospitality sector is evolving into a more mature market, supported by strong domestic tourism demand, rising religious visitor numbers and continued investment in tourism infrastructure. While regional geopolitical tensions and new supply are creating short-term performance pressures in some locations, the sector's long-term outlook remains positive. With more than 105,000 hotel rooms in the pipeline and ambitious targets for leisure, business and religious tourism, Saudi Arabia is well positioned to sustain its growth momentum and strengthen its position as a leading global tourism destination."