Saudi's tourism industry banks on niche market for growth
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Saudi’s tourism industry banks on niche market for growth

Saudi’s tourism industry banks on niche market for growth

As other regional economies target the mass market, Saudi Arabia is banking on religious travellers and staycationers to grow its tourism industry

Gulf Business

Saudi Arabia is one of the most difficult countries in the Middle East to obtain an entry visa for making it largely closed to vacationers. However, in spite of these restric- tions the kingdom still ranked as the 17th most visited country in the world in 2014.

This apparent paradox is explained by the huge increase in pilgrims coming to visit Saudi Arabia’s holy sites. Before oil, earnings from pilgrimage traffic comprised a significant source of income for the kingdom.

Even today, while still tiny in comparison to oil revenues, religious tourism generates billions of dollars of revenue from transportation, hotels and retail spending. A recent report published by the Saudi Eastern Province Chamber of Commerce and Industry said the share of tourism in Saudi Arabia’s gross domestic product stood at 2.7 per cent, although in terms of non- oil GDP it represents 5.2 per cent. Estimates put the value of the kingdom’s tourism and travel market at $45.3bn in 2014. Of this, $18.7bn was generated from domestic travellers and almost $27bn from religious visitors. There were also additional rev- enues derived from business travellers attending conferences and exhibitions.

Other than business personnel and expatriate workers, the vast majority of visitors to Saudi Arabia arrive for religious reasons. Most of them arrive to travel to Makkah each year for the Hajj and at other times through- out the year for the shorter Umrah pilgrimage.

The authorities are keen to maximise revenues by increasing the time spent in the kingdom by pilgrims, especially those with high disposable incomes. Promotions are focused on advertising vacations in Saudi Arabia to Muslim visitors once they have completed their pilgrim- ages. As a result, pilgrimage service providers have been licensed as tour operators.

The increasing numbers of pilgrimage visitors will be easier to accommodate as new infrastructure projects – including railways, new airports, roads and hotels – are completed.

The number of visitors to Makkah and Madinah is forecast to rise from 12 million a year to 17 million by 2025. Some estimates suggest that revenues have the potential to rise fourfold as pil- grimage traffic increases.

A new high-speed rail link will be a major boost for visitors. The 450- kilometre network that links Madinah with Makkah, King Abdullah Economic City and Jeddah is expected to be in operation in 2016.

The religious sites are attracting huge private invest- ments. Jabal Omar Development is leading the way by building 38 hotels on two million square metres of land near Makkah’s Grand Mosque. These include leading brands such as Hyatt, Marriott, Starwood and Hilton and will add 13,500 rooms to the city’s inventory. The government is also looking beyond pilgrimages and is keen to develop domestic tourism by encouraging families to vaca- tion in the kingdom rather than going abroad for holidays.

Saudi Arabia possesses a vast and spectacular hinterland rich in culture and history. For thousands of years, a network of caravan trails linked the Arabian Peninsula with Ethiopia, Mesopotamia, Persia and the Mediterranean.

There are many important historical sites and places of nat- ural beauty such as the Nabatean ruins of Madain Saleh – now designated a World Heritage Site. Others include the Farasan Islands, the mountain city of Taif and Jeddah’s restored Old Quar- ter. These, in addition to pristine beaches along the Red Sea, remain for the most part devoid of visitors.

A national tourism develop- ment strategy, led by the Saudi Commission for Tourism and Antiquities seeks to encourage the country’s existing nine million pilgrimage visitors to extend their stays in the kingdom. The authority is also encouraging more Saudis to vacation at home rather than abroad.

Since vacations tend to be extended during the ‘oven’ months, Saudis are big spenders wherever they go, whether in the region or to Europe and North America. Spending by Saudi trav- ellers represents billions of dollars that could potentially be spent in home resorts. SCTA hopes that new hotel, resort and transport improvements will encourage more Saudis to look locally.

The kingdom has $11.6bn of major tourism projects under way. These developments range from Saudi Aramco’s financing of 11 new sports stadiums to further phases of the Jabal Omar real estate development in Makkah.

Much wider-scale tourism development is envisaged as part of efforts to increase the visibility of the kingdom’s tour- ism and hospitality offerings. The aim is to draw visitors to other parts of the country. Only five of the kingdom’s 13 provinces currently receive significant numbers of visitors.

Plans for Saudi Arabia’s first large-scale dedicated tourism development, to be located in the Gulf coast area of Al-Oqair just south of Dammam, are already at an advanced stage. In the long term, the project could lead to $10bn of investment in the 100- square kilometre area, which includes 15 kilometres of coastline.

Other big projects are in the pipeline including development of the ancient Souk Okaz in the Taif region. The construction of resorts in the Farasan Islands in Jizan province, at Haridha in Asir province as well as at Ras Humaid, Sharma, Qayyal and Dhaffat Al Wajh in the Tabuk region is also planned.

Saudi Arabia’s Red Sea coast is a particularly attractive proposition. Stretching 1,800 kil- ometres from Jordan to Yemen, the coastline provides some of the finest coral diving in the world. Coastal projects are estimated to have the potential to attract $40bn of investment and create employment opportunities for hundreds of thousands of Saudis.

Emaar Economic City chief executive officer Fahd Al Rasheed believes that there is scope for stimulating tourism flow to the new King Abdullah Economic City, which the firm is developing. Plans are in place to develop a 50-kilometre stretch of land along the Red Sea and build nine new hotels, marinas, theme parks and an 18-hole golf course.

Rasheed estimates that more than 10 million Saudis spend their vacation time outside the kingdom. “We want to give them an alternative in Saudi Arabia for the rest of the year, not just for holidays but also as a weekend destination.”

Since mass-market tourism is not the aim, the SCTA believes that achieving 5 per cent growth annually is achievable through domestic travellers alone.

According to SCTA presi- dent Prince Sultan bin Salman, some 750,000 are employed in the sector – ranking the tourism industry as one of the most impor- tant employers in the kingdom.

As new developments are completed this number could rise quickly. The SCTA has said it is willing to support projects that it sees as essential in providing an estimated 1.1 million direct and indirect jobs by 2016.

However, a substantial voca- tional training programme will be required to reach this target. Saudi nationals at present com- prise not much more than a quarter of existing tourism- related jobs in the country.

Underpinned by pilgrimage visitors, the Saudi tourism sector has the necessary resources to establish travel and tourism as a growing employer and contributor to the country’s non-oil economy in the years to come.


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