Saudi Arabia’s Public Investment Fund (PIF) has taken another major step in developing the region’s hotel sector, as it launched a new Saudi-style hotel management company called Adeera. The move comes roughly half way through a decade-long economic transformation towards a more diversified economy, dubbed Vision 2030.
Leisure and hotels have been a key element of that reinvention ever since the introduction of the first tourism visa in 2019, with the kingdom welcoming 17.5 million overseas visitors between January and July 2024, representing a 656% increase compared with 2019, according to the Ministry of Tourism.
Saudi Arabia’s National Tourism Strategy aims to attract 150 million visitors and have tourism contribute 10% of the nation’s GDP by 2030.
However, Saudi’s rise in prominence – most evident through sports patronage and the almost inevitable awarding of the FIFA World Cup 2034 – has not come without controversy, and the KSA’s path to becoming a major leisure destination is far from assured. Neighbour Dubai is 30 years ahead of its larger neighbour and Qatar has had to continue focusing on hosting large events in order to maintain post-2022 World Cup visitor numbers.
Nor have the so-called giga-projects that define the Saudi vision escaped financial reality, most notably Neom and the science-fiction like The Line horizontal city within it, which has, depending on who you believe, been scaled to a fraction of its original proposed length or is pushing forward as originally envisaged.
Accommodation goals
Accommodating the hoped for influx will be key to the KSA’s success and between now and the end of the decade, 320,000 new hotel rooms are expected to open in Saudi Arabia, according to Knight Frank, which also places 82% of those new rooms in the luxury and upscale segments, while two-thirds of the country’s current 149,400 rooms provision are also upscale and luxury.
Many of those hotel projects are part of wider mixed use developments of new destinations, such as local developer Diriyah Company’s eponymous flagship 14 sq km mixed-use project, a major SAR 236bn (€60bn) works to transform the historic Diriyah Square site on the outskirts of the capital Riyadh. The scheme is close to the site of the Wadi Hanifah, in the region of the historic Emirate of Diriyah, described as the ‘City of Earth’ and close to the ancient Arabian UNESCO World Heritage site of At-Turaif, considered the birthplace of the Saudi Kingdom.
Alfie Gibbs, chief development officer at Diriyah Company, says that the mixed-use Diriyah Square development is set to deliver a range of new uses within the huge site, including 30 hotels, shopping, leisure, food, heritage and education spaces, as well as more than 18,000 residential units and 1.6 million sq m of office space.
He says that the project will be “more than just a physical space, it is a celebration of community. It’s about building a community, a city that reflects our values. It’s something quite extraordinary.”
Diriyah has officially broken ground on seven luxury hotels and at Cityscape Global this year in Riyadh, it also announced the launch of 59 new luxury apartments and villas for the Signature Collection of The Ritz-Carlton Residences, The launch followed the sell-out of the initial 106 Ritz Carlton Residences. At the same event, Raffles Hotels & Resorts announced the launch of 90 Raffles Residences Diriyah units.
PIF’s financial force
The financial driver behind much of the work going on is the PIF, which in December launched hotel management company Adeera, also intended as a national champion, leading the Saudi hospitality sector. Its aim is to build new world-class Saudi hotel brands and follows a series of investments by PIF in both the tourism and real estate sectors, including hospitality company Boutique Group, which specialises in developing historic and cultural palaces into luxury boutique hotels, the agri-tourism company Dan and the tourism investment company Asfar.
“The launch of Adeera comes at a pivotal time when Saudi Arabia is expanding its hospitality and tourism offerings. Adeera’s unique focus on Saudi culture and traditions will provide a distinctive edge,” says Khalid Johar, Co-head of Local Real Estate Portfolio at PIF.
While religious tourism drives many of the visitors who currently come to Saudi Arabia, the country currently loses many residents – and incoming tourists – to Dubai during the latter’s summer and winter retail promotions. As a result, the kingdom is also backing mall developers to create more shopping centres for the domestic market.
Saudi property developer Cenomi is a year away from completion of two major mixed-use centres that will deliver a “new kind of experience” never seen before in the kingdom, the company’s chief executive Alison Rehill-Erguven says.
Rehill-Erguven says that the projects, both set to open at the end of 2025, represent a major step forward both for the company, as its “first foray into mixed use”, and for the KSA, with the new centres, Jawharat Jeddah and Jawharat Riyadh, forming part of a longer-term growth strategy and a future development pipeline of six new mixed-use hubs across the kingdom.
“A centre like this does not exist in Saudi Arabia. We are very excited about it. Cenomi has always been known as a pioneer, so here we are again leading the way,” she says.
Cenomi Centres and investment firm GIB Capital (GIBC) – the investment arm of Gulf International Bank (GIB) – recently launched a Shariah-compliant real estate investment fund, with an initial capital of $266 million, to develop and market land for leisure, residential and offices. The close-ended fund will facilitate the Qassim land sale programme, a province northwest of Riyadh, along with developing the U Walk Qassim mall in Buraidah, Saudi Arabia, as part of a non-core assets sale programme.
Hybrid style
Meanwhile, Saudi Entertainment Ventures (SEVEN) has committed to invest SAR50 billion (€12 billion) to develop 21 entertainment destinations, with over 150 attractions, across 14 cities throughout Saudi Arabia. Projects being taken forward by SEVEN include a €720 million entertainment destination in Al Hamra District, Riyadh, with a total GLA of around 50,000 sq m, and which is set to house 41 F&B outlets and 18 stores.
Matthew Dadd, executive director of commercial and leasing at SEVEN, says that five of the 21 upcoming schemes would open their doors next year: “Each will include a mix of entertainment, retail, F&B plus educational elements,” he says. “Our model is a hybrid one; we are not a shopping centre and we are not a theme park. Instead, we create immersive destinations,” he adds.
Meanwhile, Neom recently launched its first destination. the Sindalah luxury resort located in the Red Sea off the Neom coastline in northwest Saudi Arabia. Designed by yachting architecture firm Luca Dini, it will be home to world-class restaurants, hotels, venues and experiences, as well as a marina and yacht club.
Accommodation includes 440 rooms and 88 villas, and 218 luxury serviced apartments and Nadhmi Al-Nasr, Neom’s CEO, says: “Neom is committed to supporting the kingdom’s new era of luxury tourism with the opening of Sindalah. Neom’s inaugural destination offers visitors a first glimpse of what the future holds for our extensive portfolio of destinations and developments.”
Completion of some of those projects will give potential investors more confidence that the country’s ambition is being matched by delivery, yet questions remain over whether the focus on luxury hotels and residences matches the wider, mass market appeal of the leisure being introduced to the kingdom.