Pilgrimage destinations compete not only through sacred attractions but also through their ability to convert religious and symbolic capital into a visitor experience under conditions of intense and fluctuating demand. This study develops and tests a context-sensitive framework for explaining the perceived competitiveness of Karbala as a pilgrimage tourism destination. An exploratory sequential mixed-methods design was employed. In the qualitative phase, 20 semi-structured interviews were conducted with experts possessing academic, managerial, and practical experience in pilgrimage tourism and destination management. Thematic analysis using a combined deductive–inductive orientation identified four main themes: spiritual–identity capital and destination authenticity; infrastructural capacity and resilience under pilgrimage demand; integrated governance and destination management during peak periods; and perceived pilgrim experience and future behavior. These themes were integrated with destination competitiveness theory to refine the quantitative model and measurement instrument. In the quantitative phase, 700 questionnaires were distributed among pilgrims in Karbala, of which 581 usable responses were analyzed using partial least squares structural equation modeling (PLS-SEM). All four predictors had positive and significant relationships with perceived destination competitiveness: destination attractions (β = 0.188), infrastructure factors (β = 0.218), destination support and management factors (β = 0.219), and pilgrim perceptions and experience (β = 0.156). Together, they explained 43.4% of the variance in perceived competitiveness (R² = 0.434), while Q² = 0.350 indicated moderate predictive relevance. The findings show that Karbala’s competitiveness is not reducible to religious attractiveness alone, but emerges from spiritual capital, resilient service capacity, multi-actor governance, and pilgrims’ evaluations of the destination.