Recent weeks have marked the most severe disruption for the Middle East hospitality industry since the early days of the COVID-19 pandemic.
What started as a noticeably busy February, with corporate travelers, meeting planners and family holidays compressing hotels across the region ahead of Ramadan, ended with some of the lowest occupancies ever reported due to the war in Iran.
Immediate impacts
On Feb. 28, the 12th day of Ramadan, the U.S. and Israel launched a series of coordinated strikes on Iran. Ahead of those strikes, regional hotel demand was already relatively soft, as domestic and intraregional travel slows substantially during Ramadan. For the seven-day period ending Feb. 27, countries in the Gulf Cooperation Council had reported year-over-year occupancy declines ranging between down 6% in Saudi Arabia to a 70% drop in Bahrain.
The situation changed immediately following the strikes. Countries across the region, including the United Arab Emirates and Qatar, immediately closed their airspace. With no way to complete trips, travelers flocked to hotels, and key GCC markets reported significant occupancy growth on the last night of February — a nearly 40% jump in Abu Dhabi and a spike of almost 70% in Muscat.
Repatriation flights, off-and-on airspace closures, and border closures continued to lift hotel occupancy for the next five to eight days as travelers moved out of and through the region in bids to return home.
Jeddah and Dubai highlight different regional impacts
The west coast of Saudi Arabia, including Jeddah, has been less affected due to limited airspace closures and increased distance from Iran. Jeddah hotels averaged 55% occupancy levels over the first 11 days of Ramadan, and after the initial eight days of conflict, settled at 57% through the remainder of the Holy Month. Stable occupancy levels indicate minimal impact from the conflict beyond the initial eight-day repatriation period.
Jeddah’s reliance on domestic hotel demand, as well as some degree of religious tourism due to proximity to Makkah and Medina, has helped keep the market stable as the conflict continues. More internationally-driven markets have not fared as well.
Dubai — one of the world’s most popular vacation destinations and a regional hub for corporate travel — averaged 81.1% hotel occupancy in 2025 and 84.8% in the first two months of 2026.
With limited new supply on the horizon, 2026 was set to be another successful year for the UAE’s largest hospitality market. Hotel occupancy the first two weeks of Ramadan surpassed 2025 levels, helped along by U.K. half-term holidays and other Western travelers.
Levels declined rapidly, however, following the initial burst of demand generated by airspace closures. Dubai hotel occupancy for the week ending March 14 sank to 22.8%, which was the market’s lowest level since the week ending April 11, 2020 (22.6%).
Dubai occupancy then moved to 28.2% the week ending March 21 because of the Eid al-Fitr holiday. Occupancy peaked over the weekend, averaging 42%.
Eid al-Fitr
The Eid al-Fitr public holiday ran from March 19-22 across most countries. International inbound demand remained extremely suppressed, but domestic demand helped lift hotel occupancy in some markets.
Saudi Arabia’s hotel markets topped the charts for Eid al-Fitr demand, in part due to the country's population. With more than 37 million residents as of 2025, Saudi Arabia is more than three times more populous than the United Arab Emirates, the second-biggest GCC country. Reliance on religious tourism in the West, along with fewer airspace closures and a higher propensity for domestic travel, helped fill Saudi hotels over the holiday period.
Hotels in UAE's capital Abu Dhabi did not fare as well. Occupancy reached 47.7% for the four days with a peak of 55.7% on Friday night. However, that represented a 45% year-over-year decline. Occupancy also dropped back below 40% on March 22, the last day of the holiday.
With domestic guests the primary source of hotel demand, geography affected hotel performance over Eid as well. Limited and inconsistent airlift made drive-to destinations the preferred option for Eid travel. For Salalah, located more than 1,000 kilometers from Omani capital Muscat, attracting domestic demand was difficult. Hotel occupancy declined 88.4% relative to Eid 2025, reaching just 9%.
Pandemic comparisons
Hotel occupancy levels and declines have reached or even surpassed COVID-era lows across many markets. For Dubai, occupancy levels have hovered near pandemic-era lows, but year-over-year declines have been sharper. The bigger declines are caused by Dubai’s increased global popularity. At 90%, February 2025 occupancy was a full 5 percentage points higher than February 2019 occupancy, making a drop to sub-30% occupancy levels that much steeper this year.
Inventory levels are much higher today than in 2020. For example, Qatar has 47% more hotel rooms today than in 2020. However, the market did not fall to all-time occupancy lows because of reliance on long-stay guests, as well as short-term demand from oil field workers. At 42.1% during the week ending March 21 and 44.2% the week prior, Qatar’s hotel occupancy and year-over-year declines were less severe than early 2020.
Demand type is the final factor to consider in 2020 comparisons. For markets such as Abu Dhabi, quarantine hotel rooms provided a steady demand source when “normal” travel was missing in 2020, which kept occupancy at 40.6% during the market’s worst days. Occupancy for the week ending March 14, 2026 fell lower to 39.5%. Abu Dhabi’s reliance on international business and leisure travel will severely restrict market demand until the war ends and airspace fully reopens.
The outlook
The last three weeks have proved to be some of the most challenging for the Middle East hospitality markets, and hotel demand across the region will remain extremely suppressed until the war ends.
While it remains too early to determine exactly when recovery can happen, Middle East market resiliency should not be underestimated. Hotel markets such as Dubai, Abu Dhabi, and Riyadh have rapidly expanded in global popularity over the past decade, drawing in scores of business and leisure travelers alike with increasing hotel supply to match.
The region made headlines in 2022 as some of the first markets to recover post-pandemic, and long-term investment into infrastructure, attractions and marketing will serve these markets well in their recovery following an end to the conflict.