During the period between 2023 and 2025, the Middle East region has established itself as the most profitable region for the hotel industry globally, with marginal but sustained year-on-year growth. This situation is the result of various quantifiable structural factors, including a shift in demand segments (or the type of tourists it receives), strategic competition between key markets (among its main countries), a diversified asset portfolio (or a range of hotels to suit all budgets) and multi-million pound investment in infrastructure development.
Let’s start by understanding the issue of the public travelling to the Middle East. Indeed, the main reason for the region’s growth is a change in the source of income. A few years ago, perhaps a decade or more, a significant proportion of hotel guests travelled to the region for government reasons. However, this type of booking has now plummeted and the average room rate has fallen by more than 12%, highlighting the decline in the importance of this customer in the region’s total revenue spectrum. But then, who has taken their place? Let’s continue…
Tourists travelling on package holidays and wholesalers have taken over from those who used to travel to the region for government or administrative reasons. They are now the ones paying the highest prices per room. This fact demonstrates, as we read in the report published by HotelsMag, a “a structural shift away from public sector dependence toward higher-yielding leisure and negotiated segments”. Not only that, but the government segment is the only one that has contracted, while all others, particularly leisure, have experienced sustained growth. In other words, the business no longer depends on public spending, but on conventional tourists.
Dubai and Saudi Arabia: competition that benefits the entire region
Two players are at the forefront of the boom. On the one hand, the emirate of Dubai (United Arab Emirates), which has gone from being a single urban centre to becoming a “diversified metropolis” with districts dedicated to finance, media and creative industries, and leisure. On the other hand, Saudi Arabia is bursting onto the scene. Thanks to its ‘Vision 2030’ plan, public funds have injected excessive investment into infrastructure and tourism, putting “real competitive pressure on Dubai”. This rivalry is driving quality and supply throughout the region.
Hotels for all budgets: the surprise of the mid-range
Although we tend to associate the region with luxury, the most profitable and fastest-growing segment is precisely the mid-range. Analysis confirms that “midscale properties lead the market in terms of overall profitability and are the most lucrative.” That does not mean that large hotels are not still very profitable, as “upscale to ultra-luxury hotels maintaining stable margins of gross operating profit in the mid to low 40% range.” In other words, the region is profitable at all levels.
Riyadh, leader in catering
An example of efficiency can be found at one end of this exuberant landscape: hotel restaurants and bars. Riyadh, the capital of Saudi Arabia, is the most profitable city in this area, with a margin of 48% in 2025, above that of Dubai, which was 41.3%. This result is due to the fact that, ”prices are high and costs are contained, leading to a new global performance standard in F&B profitability”.
Investment for the future: thousands of rooms under construction
Investors and developers in the hotel industry are undoubtedly well aware of this situation and are rushing to position themselves for the future. According to GCC Business Watch, the portfolio of new hotel construction projects in the Middle East reached a record high of “650 projects totalling 161,574 rooms”. Saudi Arabia leads this expansion with “342 projects and over 92,000 rooms”, followed by the United Arab Emirates with “100 projects and 25,470 rooms”.
Sources: HotelsMag, GCC Business Watch, RLA Global, Hospitality Net, The Super Prime.
