DUBAI- Saudi Arabia launched a new luxury hospitality firm on Thursday to develop palaces into opulent hotels.

The firm, called Boutique Group, will develop Jeddah's Al Hamra Palace and Riyadh's Tuwaiq Palace and Red Palace, said a statement from the kingdom's Public Investment Fund (PIF). The sites will offer 244 rooms, suites and villas.

The world's biggest oil exporter aims to grow tourism to contribute 10% of gross domestic product by 2030 under plans to diversify the economy.

Development of the three palaces would be a first phase, with other "high-end experiences" planned including restaurants and spas.

PIF Governor Yasir al-Rumayyan said the launch underlines the $480 billion sovereign wealth fund's "mandate to unlock the capabilities of promising sectors in Saudi Arabia that can help drive the diversification of the economy and contribute to non-oil GDP growth."

(Reporting by Yousef Saba Editing by Peter Graff) ((Yousef.Saba@thomsonreuters.com; +971562166204; https://twitter.com/YousefSaba))