Focus: Riyadh’s plan for tourism boosts short-term rental’s market projections.
Policies at the base of the Surge in STR
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Last year, the Saudi tourism ministry approved a new bylaw allowing citizens to lease their residences to tourists.
This decision opened doors for rental accommodation platforms such as Airbnb, HomeAway, and Vrbo, while simultaneously fueling demand for short-term rental properties.
Additionally, the government's policy requiring overseas companies to establish regional headquarters in Saudi Arabia to engage in business activities has led to an influx of corporate executives, further driving up demand for short-term rental properties.
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Experts in the industry attribute the growth of the short-term rental market in the country, which began in 2023, to these parallel policy initiatives.
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While the Saudi short-term rental market is still in its nascent stages, it is projected to experience modest annual growth rates of around 1-2 percent initially.
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Tourism will fuel more demand
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Since opening its doors to international tourism in September 2019, Saudi Arabia has unveiled several megaprojects aimed at attracting visitors, including a $530 million fund dedicated to developing key destinations across the Kingdom.
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In the past year, Saudi Arabia's government revised its target for total visitors by 2030 from 100 million to 150 million, encompassing both domestic and international travelers. Through continued investments in tourism, hospitality, and leisure sectors, alongside ambitious gigaprojects, the nation aims to elevate the tourism sector's economic contribution to 10% of the national GDP by the decade's end.
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Recent data from Saudi Arabia's Ministry of Tourism indicates a notable surge in inbound tourism during the first half of 2023. The Kingdom welcomed 14.6 million tourists during this period, marking a significant 142% increase compared to the previous year. Additionally, there was a noticeable uptick in domestic tourism, with a 16% rise in spending and an average stay duration extending to 6.3 nights, up from 4.6 nights in the same period of 2022.
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Within this evolving ecosystem, the demand for accommodations is poised to escalate over the next decade. Hotels, therefore, will require supplementary support from alternative lodging options such as short-term rentals.