In a region long synonymous with luxury hospitality, a quiet revolution is underway. Midscale hotels – the overlooked middle child of the hospitality industry – are now gaining significant traction across the Middle East and Africa (ME&A) region. As investor sentiment shifts, so does the hospitality landscape, with a growing realization that mid-range offerings are not only commercially viable but also strategically essential.
The global middle class is projected to reach 1.8 billion travelers by 2030, with 80 percent likely to choose mid-range hotels. Notably, around 300 million middle-class Indians are expected to travel internationally in the next few years, primarily opting for mid-market accommodation.
Changing traveler expectations
In the Middle East, post-pandemic recovery, changing traveler profiles and broader economic diversification have led to an uptick in demand for affordable, mid-market accommodation. In fact, the mid and upper midscale segments are now outperforming other categories in terms of growth. Significantly, these categories are attracting both leisure and business travelers who are looking for value without sacrificing quality. In the UAE, the mid and upper-mid-scale segment is emerging as the fastest-growing category with a projected growth rate of approximately 6 percent during 2024-2029.
This shift is being fueled in part by changing traveler expectations. Today’s guests are more experience-driven, prioritizing location, functionality and convenience over opulence. In this context, mid-range hotels offer the perfect balance of affordability and comfort, particularly for millennial and Gen Z travelers, digital nomads and cost-conscious business travelers.
Investor-friendly economics
From an investment perspective, mid-market hotels are a compelling proposition. Their lower development and operational costs result in more favorable margins and faster returns on investment (ROI) compared to luxury properties. These assets also tend to be more resilient in economic downturns, as they cater to a broader customer base.
The operating model of mid-market hotels is generally leaner, relying on smaller staff-to-room ratios and more standardized services which translates into lower overheads. This efficiency is especially attractive to investors navigating an uncertain global economic environment, where ROI and risk mitigation are paramount.
Furthermore, investors, particularly those who own multiple properties, have the option to engage third-party hotel management companies and affiliate their hotels with various internationally franchised brands. This approach enhances operational efficiency and maximizes profitability.
Growth beyond gateway cities
Luxury hotels continue to dominate in primary markets like Dubai, Abu Dhabi and key Saudi cities. However, the real growth story for mid-market hotels is unfolding in secondary and tertiary cities across the region. Locations such as Ras Al Khaimah (RAK), AlUla and Salalah are experiencing greater tourism interest, supported by government diversification efforts. They are also benefiting from moves underway in regional markets to extend tourism beyond major hubs.
Investors are increasingly looking at these emerging destinations where land is more affordable. Competition is often lower in these locations and the regulatory environment can be more supportive of new developments. In RAK, for example, the authorities are courting mid-market brands in their efforts to become a year-round tourism destination.
Diversifying the tourism base
A key factor underpinning this trend is the diversification of source markets. Traditional feeder markets like Europe and the GCC remain strong. However, simultaneously, new markets across Asia and Africa
are becoming increasingly relevant. Travelers from these regions tend to seek affordability and value, further reinforcing the demand for mid-range offerings.
This broadening of the tourist base aligns perfectly with the mid-market model. The adaptability of these hotels allows them to serve a more diverse clientele, from family vacationers to digital nomads and wellness-focused travelers.
Aligning with modern travel trends
Today’s travelers are not just looking for a place to stay. They’re looking for smart, convenient and authentic experiences. Mid-market hotel brands are becoming increasingly responsive to this demand, integrating digital technologies, sustainability practices and local cultural elements into their service offerings.
Many mid-market operators are embracing a ‘lifestyle light’ model. This includes locally inspired design, community-centric amenities and curated experiences that resonate with modern sensibilities. Such initiatives not only appeal to today’s travelers but also enhance brand differentiation in a competitive market.
Strategic implications for investors
The rise of midscale hotels in the ME&A region reflects broader shifts in travel behavior, economic policy and investment strategy. For investors, the implications are clear:
• Secondary cities are untapped markets with promising ROI potential and lower barriers to entry.
• Franchising and third-party hotel management agreements in the midmarket space are asset light and high impact. They offer attractive returns without heavy capital expenditure.
• A broad customer base insulates midscale assets from demand shocks affecting niche or luxury markets.
• International operators are seeking partners to expand mid-market brands, creating strong alignment between local investors and global hospitality players.
As ME&A countries move toward more inclusive and diversified tourism strategies, mid-range hotels are stepping into the spotlight. They are no longer just the economical option – they’re the strategic one.
For investors seeking resilience, scalability and alignment with future travel trends, mid-range hospitality assets offer a sweet spot that balances opportunity with sustainability. In a region famous for its extravagance, it may just be the midscale segment which will be driving hospitality investment in the coming years.
