Saudi tourism gains from Hajj, Umrah and domestic tourism: JLL

Riyadh city

Real estate consultancy JLL said the Hajj and Umrah seasons, continued domestic tourism activity, revenue optimization strategies, and cost rationalization helped strengthen the resilience of Saudi Arabia’s hotel sector amid regional disruptions, which impacted international travel.

While business-oriented markets adapted to weaker corporate demand and an expected increase in supply from projects under construction, Makkah and Madinah recorded strong performance indicators, supported by higher numbers of pilgrims and Umrah performers, it added.

According to JLL’s report titled KSA Hotels Market Dynamics Q2 2026, hotel sector performance varied significantly across Saudi cities from the beginning of the year through June 2026. Religious tourism destinations outperformed business-focused markets, supported by steady year-on-year (YoY) growth in inbound pilgrim numbers during the Hajj season.

Makkah recorded the strongest growth, with occupancy increasing by 6.3 percentage points YoY to 68.2%, while revenue per available room (RevPAR) rose 8.7% YoY.

Post-Hajj demand also extended to Madinah, sustaining hospitality performance across both Holy Cities throughout Q2. Madinah recorded the Kingdom's highest occupancy at 75.1%, with steady pilgrimage demand limiting RevPAR decline to 2.4% despite softer average daily rates (ADR).

Riyadh recorded the sharpest deterioration, with occupancy falling 16.3 percentage points to 47.6% and RevPAR declining 23.2%, amid weaker corporate demand and heightened competition resulting from increased hotel supply in business-oriented markets.

Jeddah, meanwhile, demonstrated greater resilience, with occupancy declining by only 1.3 percentage points to 66.4%. Nevertheless, RevPAR fell 7.2%, driven by lower average daily rates despite continued strong domestic demand for leisure tourism.

As religious and domestic tourism demonstrated greater resilience than international leisure tourism, investment continued to favor markets with strong demand fundamentals. Makkah and Madinah expanded their accommodation capacity to support the Kingdom’s ambitious targets for growth in religious tourism and the Hajj and Umrah sectors.

JLL also noted that Makkah’s hospitality inventory increased by approximately 1,100 hotel rooms during Q2, while Madinah added around 220 rooms, bringing the combined room inventory in the two cities to 354,800 rooms.

Riyadh’s hotel inventory increased by nearly 490 rooms, while Jeddah added around 180 rooms during Q2, reflecting the continued diversification of accommodation options in both cities.

JLL expects new hotel supply in major cities to intensify competition, placing greater emphasis on upgrading asset quality, delivering differentiated guest experiences, and strengthening brand positioning to maintain market performance.

Hotel operators are placing greater emphasis on revenue optimization, cost efficiency, and adopting modern technologies in operations to respond to changing demand patterns while maintaining profitability.

Although overall tourism activity declined by approximately 5-7% during the first five months of the year, JLL said the sector’s long-term outlook remains positive. Market performance is expected to strengthen as international travel confidence recovers and tourism demand continues to diversify to include both domestic and international visitors.

JLL also expects investor sentiment to remain broadly positive over the medium to long term, supported by the Kingdom’s strong tourism fundamentals and Vision 2030 objectives. However, capital allocation may become more selective amid continued geopolitical uncertainty, with capital expected to favor projects demonstrating proven demand resilience and clear value propositions.

The continued government commitment to developing the tourism sector, including infrastructure improvements, mega-project development, expansion of entertainment destinations, and enhanced transportation connectivity, is expected to support sustainable demand growth and further expand Saudi Arabia’s hospitality sector.