Middle East hotel industry updates
The Middle East continues to present a nuanced picture of hotel performance, shaped by geopolitical dynamics and domestic economic fundamentals. Meanwhile, some parts of the region are still affected by political uncertainty, which dampens growth and limits long-term investor confidence. However, the GCC countries, particularly the UAE, Saudi Arabia and Qatar, remain robust performers, driven by infrastructure development and ambitious tourism strategies.
GCC’s strong economic drivers
To begin with, GCC nations are implementing major diversification programs designed to reduce reliance on oil and stimulate broader economic growth. For example, initiatives like Saudi Arabia’s Vision 2030 and the UAE’s transformation agenda serve as catalysts for hotel sector development. Consequently, these programs drive infrastructure projects, expand tourism offerings and attract leisure and business travelers, strengthening overall hotel performance across the region.
GCC’s impressive growth
Since 2019, room demand across the GCC has grown by 21.8 percent, as measured by the number of occupied rooms. Moreover, room revenue has surged by 46.9 percent, highlighting a strong upward trend beyond mere post-pandemic recovery in the region. This suggests robust growth driven by rising visitation, major high-profile events, and sustained pricing power across key hospitality markets in the GCC.
High occupancy and premium rates
In Q1 2025, key GCC markets like Dubai and Abu Dhabi reported occupancy levels exceeding 80 percent, reflecting resilience and steady demand. Furthermore, cities such as Riyadh, Makkah, Medina, Dubai and Abu Dhabi rank among the top global performers in average daily rates.
Notably, Riyadh leads with an impressive ADR of USD 237, driven by strong corporate demand and growing interest in luxury hospitality experiences. Additionally, these cities benefit from religious tourism, mega events, business travel and luxury leisure offerings, fueling sustained hotel sector performance.
Mega projects
To begin with, giga-projects like NEOM, Qiddiya, Diriyah Gate and the Red Sea Development are creating powerful future demand generators. Meanwhile, continued investment in luxury and lifestyle brands across the UAE further fuels tourism potential and enhances regional hospitality infrastructure and appeal. In particular, Riyadh is experiencing a remarkable transformation, structurally, economically and culturally, positioning it as one of the world’s strongest hotel markets.
2025 and beyond
Despite this, STR forecasts a softening in growth over the next two to three years, following a strong short-term outlook. Although growth is expected to remain positive, it may not reach the exceptional levels observed across the region since 2020. This is because a surge in new hotel supply and a seasonal shift tied to Ramadan are influencing tourism patterns significantly. Additionally, geopolitical uncertainty and falling oil prices, alongside a weakening US dollar, could trigger wider economic and investor-related concerns. Given that GCC currencies are pegged to the dollar, these macroeconomic changes may impact both investor confidence and consumer spending behavior.
All Eyes on the Middle East with Philip Wooller at STR
Philip Wooller, senior director of MEA at STR, gives us a roundup of the hospitality sector in the Middle East and what the future holds.
Middle East hotel industry updates
The Middle East continues to present a nuanced picture of hotel performance, shaped by geopolitical dynamics and domestic economic fundamentals. Meanwhile, some parts of the region are still affected by political uncertainty, which dampens growth and limits long-term investor confidence. However, the GCC countries, particularly the UAE, Saudi Arabia and Qatar, remain robust performers, driven by infrastructure development and ambitious tourism strategies.
GCC’s strong economic drivers
To begin with, GCC nations are implementing major diversification programs designed to reduce reliance on oil and stimulate broader economic growth. For example, initiatives like Saudi Arabia’s Vision 2030 and the UAE’s transformation agenda serve as catalysts for hotel sector development. Consequently, these programs drive infrastructure projects, expand tourism offerings and attract leisure and business travelers, strengthening overall hotel performance across the region.
GCC’s impressive growth
Since 2019, room demand across the GCC has grown by 21.8 percent, as measured by the number of occupied rooms. Moreover, room revenue has surged by 46.9 percent, highlighting a strong upward trend beyond mere post-pandemic recovery in the region. This suggests robust growth driven by rising visitation, major high-profile events, and sustained pricing power across key hospitality markets in the GCC.
High occupancy and premium rates
In Q1 2025, key GCC markets like Dubai and Abu Dhabi reported occupancy levels exceeding 80 percent, reflecting resilience and steady demand. Furthermore, cities such as Riyadh, Makkah, Medina, Dubai and Abu Dhabi rank among the top global performers in average daily rates.
Notably, Riyadh leads with an impressive ADR of USD 237, driven by strong corporate demand and growing interest in luxury hospitality experiences. Additionally, these cities benefit from religious tourism, mega events, business travel and luxury leisure offerings, fueling sustained hotel sector performance.
Mega projects
To begin with, giga-projects like NEOM, Qiddiya, Diriyah Gate and the Red Sea Development are creating powerful future demand generators. Meanwhile, continued investment in luxury and lifestyle brands across the UAE further fuels tourism potential and enhances regional hospitality infrastructure and appeal. In particular, Riyadh is experiencing a remarkable transformation, structurally, economically and culturally, positioning it as one of the world’s strongest hotel markets.
2025 and beyond
Despite this, STR forecasts a softening in growth over the next two to three years, following a strong short-term outlook. Although growth is expected to remain positive, it may not reach the exceptional levels observed across the region since 2020. This is because a surge in new hotel supply and a seasonal shift tied to Ramadan are influencing tourism patterns significantly. Additionally, geopolitical uncertainty and falling oil prices, alongside a weakening US dollar, could trigger wider economic and investor-related concerns. Given that GCC currencies are pegged to the dollar, these macroeconomic changes may impact both investor confidence and consumer spending behavior.
Philip Wooller,
senior director of MEA
STR
str.com
@philipwooller
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