Feasibility Studies for Real Estate and Hospitality Projects: Investment Guide for Major Arab Destinations 2026

Executive Summary

The real estate and hospitality sector serves as a primary driver of development in the Middle East, fueled by mega projects and major demographic and tourism shifts.

However, real estate investment demands long-term commitment and careful analysis of supply and demand dynamics.

This article aims to outline a methodology for conducting feasibility studies for residential, hotel, and mixed-use projects, with a focus on key performance indicators (KPIs) such as Internal Rate of Return (IRR), Average Daily Rate (ADR), and Revenue per Available Room (RevPAR) to ensure sustainable profitability.

Real Estate & Hospitality Glossary

Professional Description

Term
Total buildable area as permitted under local regulations and licenses. GFA (Gross Floor Area)
The average rate per hotel room sold per day. ADR (Average Daily Rate)
The “golden metric” of hotel profitability (Occupancy × ADR). RevPAR (Revenue per Available Room)
Ratio of Net Operating Income (NOI) to property value. Cap Rate (Capitalization Rate)
Speed at which real estate units are sold or leased in the market. Absorption Rate

1. Regional Context: Real Estate and Hospitality Boom 2026

The Arab region is witnessing a completely new investment map:

  • Riyadh, Saudi Arabia: High demand for premium offices and large residential units (e.g., Roshn, New Murabba projects).

  • Dubai, UAE: Continues to break records in luxury real estate and unique hotel experiences.

  • Egypt (North Coast & New Cairo): North Coast transforming into a year-round global tourist destination (e.g., Ras El Hikma project).

  • Red Sea, Saudi Arabia: Luxury and eco-tourism projects redefining sustainable hospitality.

2. Real Estate Feasibility Methodology: Supply and Demand

The biggest mistake in real estate is building what you like, not what the market needs.

A. Market Gap Analysis

  • Current Supply: Number of units currently available in the target area.

  • Pipeline Projects: Projects expected to launch over the next 3–5 years.

  • Market Gap: Identifying shortages (e.g., serviced apartments, co-working offices, mid-range villas).

B. Highest and Best Use (HBU)

Determines which type of development yields the maximum land value: hotel, residential tower, retail complex, or a mixed-use combination.

C. Real Estate Financial Feasibility

Long-term cash flow analysis includes:

  • CapEx (Land & Construction Costs): Including government fees and financing costs.

  • NOI (Net Operating Income): Revenue after all operating and maintenance expenses.

  • Exit Strategy (Terminal Value): Estimating property resale value after 10 years.

3. Hospitality Feasibility: The Language of Hotels

Hotels sell time, not just assets. Key study aspects include:

  1. Comp Set Analysis: Selecting 5 comparable hotels and evaluating their performance.

  2. Seasonality: Planning for low-demand periods.

  3. Operator Relationship: Self-managed vs. international brand management (e.g., Hyatt, Marriott) and management fees.

4. Efficiency Levers in Real Estate Development

  • Modular Construction: Reduces construction time by ~30%, lowering financing costs.

  • Smart Cities / PropTech: Integrating technology to reduce operational expenses (OpEx).

  • Big Data Analytics: Understanding buyer behavior and preferences before design.

5. Reliable Real Estate Data Sources (2020–2026)

  • Land and Property Departments: e.g., Dubai Land Department, Saudi Ejar platform.

  • Global Consulting Reports: JLL, Knight Frank, CBRE.

  • Tourism Ministries: Visitor numbers and occupancy rates.

  • Real Estate Investment Bulletins: Issued by central banks.

Case Study: “Residential & Serviced Apartment Tower” in Riyadh

Challenge: High land costs in North Riyadh.

Solution: HBU analysis showed that combining residential and serviced apartments reduces vacancy risks. First floors allocated to co-working spaces for incoming startups.

Result: 60% of residential units sold off-plan; IRR reached 24%, 6% higher than pure residential projects.

Real Estate & Hospitality Investor Checklist

  1. Confirm land ownership and zoning compliance.

  2. Calculate realistic Vacancy Rate.

  3. Include design and project management fees.

  4. Ensure strong infrastructure (roads, electricity, metro).

  5. Assess tax impact (VAT, property transaction tax).

  6. For hotels: room and facility sizes comply with 4-5 star standards.

  7. Define exit strategy or potential REIT securitization.

Common Mistakes (SEO Tips)

  • Ignoring CapEx reserves for major maintenance every 5–7 years.

  • Relying solely on current prices; failing to anticipate future supply.

  • Underestimating licensing timelines, starting loan interest payments before building permits.

Key Takeaways

  1. Real estate is a safe asset, but financial feasibility protects against market downturns.

  2. Mixed-use projects are more resilient to market fluctuations.

  3. In hospitality, you invest in service experience, not just walls.

  4. Data is the compass: Occupancy rates and daily rates determine asset value.

  5. Sustainability (ESG): Green buildings command higher rents and resale prices.

7-Step Action Plan for Developers

  1. Secure land and legal compliance.

  2. Conduct deep market research (luxury, mid-range, economy).

  3. Perform HBU analysis for optimal mix.

  4. Design for space efficiency (Net vs Gross Area).

  5. Build a strict financial model (IRR, NPV, cash flow scenarios).

  6. Secure financing (banks, partners, off-plan sales).

  7. Select contractors and operators prioritizing quality and timeline adherence.

References

  • Knight Frank, Middle East Real Estate Market Report 2025.

  • JLL, Hotel Performance Reports in Major Cities 2024–2025.

  • Saudi Ministry of Tourism, Annual Statistical Bulletins.