Nestled between two seas and two continents, Saudi Arabia stretches over 2.1m sq km, an area as large as Western Europe. Its diverse landscapes offer a wide variety of scenery; while its rich history, culture and significance in the Muslim religion attract visitors from around the world, making it one of the most visited countries in the world.
At around 31.7m – one-third of whom are expatriates – the Kingdom has the largest population of any country in the GCC region providing it with a sizeable source of domestic tourism. Furthermore, Saudi Arabia had an estimated GDP of $689bn in 2017, ranking it as a high-income country, meaning its inhabitants have substantial purchasing power that could be flexed in the travel sector.
It comes as no surprise, then, that developing the country’s tourism sector has become a key priority in recent years, especially given that Saudi Arabia is seeking to boost diversification of its domestic industries away from hydrocarbons dependency.
Historically, Saudi Arabia has been divided into four main regions: the Hejaz, which covers the western coast from the Gulf of Aqaba south via Jeddah towards the border with Yemen; the central region of Najd, in which the capital Riyadh is located; the Eastern Province, which borders the Gulf and includes the city of Dammam; and the ‘Asir region in the south bordering Yemen.
Administratively, these areas divide up into 13 provinces: the largest by surface area is the Eastern Province, followed by Riyadh; to the north-west the Hejaz contains Tabuk, Medina and Makkah; while Qassim, Hail, Jawf and the Northern Borders are in the north-east; and the southern regions comprise ‘Asir, Al Bahah, Jizan – which includes the Red Sea Farasan Islands – and Najran. These regions contain vastly different geographies and geologies, from the high mountains and ancient volcanoes of the Hejaz to the towering cliffs of the Tuwaiq Escarpment around Riyadh – home to the famous “Edge of the World” site – in addition to the giant sand dunes of the Empty Quarter (Rub Al Khali), and the foothills of the Hajar Mountains along the border with Oman. Oases, valleys, miles of pristine coast and dozens of offshore islands complete the landscape.
In terms of cultural attractions, the Arabian Peninsula has been inhabited for many millennia, and numerous civilisations have left their mark over that time. There are more than 4000 registered archaeological sites across the Kingdom, as well as a number of UNESCO World Heritage sites, such as the early primitive rock art sites at Jabal Umm Sinman near Jubbah, and Jabal Al Manjor and Raat at Shuwaymis in the Hail region.
Later civilisations include the Nabataeans, perhaps better known for their capital, Petra, in neighbouring Jordan. Less well known, but equally spectacular, is the UNESCO World Heritage site in the Nabataean city of Mada’in Saleh, prized for its palaces sculpted into the sides of rock formations. This site is located in the northern section of the Medina region, and dates back to at least the 9th century BCE.
Another cultural highlight is the historic oasis of Al Dir’iya and the Atturaif Quarter in Wadi Hanifa, located just outside Riyadh. This settlement dates back to medieval times, and was once the capital of the first Saudi state, established by Al Imam Muhammad Ibn Saud in 1774. The site is benefitting from a major environmental rejuvenation project, as well as restoration and preservation of its architecture, which helped the settlement achieve UNESCO status in 2010. The attraction – set to be opened in early 2018 – is one of the world’s largest museum projects.
The country’s fourth UNESCO World Heritage site is Historic Jeddah, the Gate to Makkah. Detailed and extensive renovation and restoration work has been undertaken in the Red Sea port city’s old town to preserve some of its most archaeologically and architecturally important neighbourhoods. Having such a well-preserved historical site is a major asset for a city that is already one of Saudi Arabia’s main tourism draws. Jeddah also offers a beautiful seaside location, its famous 30-km corniche and the offshore King Fahd’s Fountain, as well as modern shopping centres like the Red Sea Mall.
Jeddah has historically been the key transit port for pilgrims coming to the two holy cities of Medina and Makkah. Every year Muslims from around the world come to Saudi Arabia for this purpose, with 2016 seeing some 1.33m foreign pilgrims join 538,000 locals in fulfilling this requirement of their religion. While Makkah is out of bounds to non-Muslims, Medina – except for its haram area – is open to all.
Riyadh is a key site for international arrivals. The city, known for being the business and political centre of the country, is also the location of the well-known Kingdom and Faisaliah Towers, and boasts a series of major museums and historical sites centred around the Al Masmak Fort. Additionally, the city possesses a number of large-scale shopping venues, such as the Al Faisaliyah Centre and Al Nakheel Mall.
An increasingly popular destination beyond the cities is the Empty Quarter itself, with a growing number of tourists choosing to take expeditions across the dunes and plains of this vast landscape. Another highly frequented destination in recent times has been the Farasan Islands, located in the Red Sea and surrounded by coral reefs. A ferry connects this group of islands – some 40 km from the coast – to Jizan. The port of Al Lith is another well-used starting point for diving expeditions to the Farasan Banks, which is part of the marine ecosphere that includes the offshore islands. In mid-2017 a new development dubbed The Red Sea was launched between the coastal cities of Umluj and Al Wajh. The project will see a resort built across a chain of 50 islands located a short distance from a nature reserve and the dormant volcanoes of Harrat Rahat.
The southern cities of Najran and Abha have been inhabited for about 4000 years, and are known for their natural beauty. While access to the former is currently restricted, the latter still acts as a gateway for national parks, such as the Asir National Park and Al Soudah, the highest peak in the ‘Asir region. The mountains of the southern Hejaz have multiple dormant volcanic craters, including the Wahaba Crater, located 700 km from Riyadh in the direction of Taif. The city of Taif is also an attraction, known for its spring Taif Rose Festival. To the north of Riyadh is the Qassim region, famous for its dates, as well as historical sites at Buraidah and Unaizah.
While the above tourist destinations have long been known to those living in the country, relatively few beyond the Kingdom’s boundaries have yet had the opportunity to visit them. However, the number of arrivals to Saudi Arabia has been growing steadily. According to the Tourism Information and Research Centre (MAS), a department of the Saudi Commission for Tourism and National Heritage (SCTH), Saudi Arabia received 20.9m international visitors in 2016, with 18m overnight guests and 2.9m same-day visitors. This is in keeping with the gradual growth in inbound tourism flows over the past few years, with the MAS recording 13m visitors in 2010, with a compound annual growth rate (CAGR) of 8.3% during the period 2010-16. By comparison, Dubai welcomed some 14.9m international visitors in 2016, according to the Dubai Tourism 2017 report, while around 2.5m visited neighbouring Oman, according to Oman’s Ministry of Information. Given these figures, Saudi Arabia already plays host to more international visitors than many of its GCC neighbours.
Indeed, the 2017 report on Saudi Arabia from the World Travel and Tourism Council (WTTC) shows that in 2016 the tourism sector made a larger direct financial contribution to GDP in Saudi Arabia than in any other GCC country, at some $21bn. This was higher than the world average of $19.1bn and the Middle East average of $6.3bn.
In terms of percentage share the figure was 3.3%, equal to the regional average, though lower than that of the UAE at 5.2% and Qatar at 3.4%, reflecting the larger overall size of the Kingdom’s economy.
The WTTC report also showed that in 2016 travel and tourism, including indirect contributions, contributed some $65.2bn to Saudi Arabia’s GDP. This translated into 603,700 direct jobs and 536,000 indirect jobs, supporting 1.14m jobs in total and representing 9.7% of total employment.
Moreover, the sector drew $28.6bn in investment in 2016, according to the WTTC, the highest level of any GCC or Middle Eastern country, and well above the global country average of $4.4bn. Local and international visitors contributed $11.5bn to the Kingdom’s economy that year, the second-highest level in the GCC region after the UAE at $29.9bn.
While these are clearly already strong figures – particularly given that in the past tourism has not been a major focus for the Saudi economy – the future holds great potential. Driving this is the fact that recent years have seen the Kingdom’s economy come under increasing pressure to diversify. The persisting drop in global oil and gas prices that began in 2014 impacted government revenues, which had long been dependent on income from hydrocarbons sales. GDP growth fell from 4.1% in 2015 to 1.7% in 2016, according to World Bank figures. Meanwhile, the IMF forecast growth of 0.4% for 2017, followed by a rebound to 2.3% in 2018. Although the Kingdom possesses considerable reserves and global investments, it has shown a preference for borrowing on international markets to finance its budget deficit, in addition to cutting public expenditure. Although this has brought fiscal security, Saudis have had to bear considerable belt tightening as a result. The downturn has served to highlight the pressing need for the Kingdom to restructure much of its economy. This is the focus of the latest national development plan, Vision 2030, the details of which were made public by the then-Deputy Crown Prince Mohammed bin Salman bin Abdulaziz Al Saud in April 2016.
Vision 2030 has three basic themes, all of which have important implications for the tourism sector: first, to foster a vibrant society; second, to generate a diversified thriving economy; and third, to create an ambitious and global nation. To achieve this, SR9.93bn ($2.6bn) was allocated to tourist and travel projects and initiatives in the 2017 budget, according to local media reports.
Under the first theme, special mention is made of the Kingdom’s two holy mosques and the growing number of pilgrims visiting them. Over the course of 10 years the number of Umrah visitors tripled, to reach some 8m in 2016. Facilitating further growth in numbers is outlined as a key task, with a specific target of 30m Umrah visitors per year by 2030, and a 2020 target of 15m. The government is already engaged in these efforts; a third expansion of the two holy mosques is currently under way, while projects such as the Makkah Metro will help transport pilgrims more efficiently around religious sites.
The strategy identifies the country’s intention to enrich the experience of pilgrims by establishing more museums, cultural events and venues for Umrah visitors to see. In addition, the strategy aspires to build the world’s largest Islamic museum, library and research centre. Progress has already been made in this regard, with the design contract for a new museum in Makkah awarded in January 2016 to the UK-based Mossessian Architecture.
This plays into the broader theme of recognising and further celebrating the extensive cultural, natural and historical heritage of the Kingdom. Achieving this will involve increased investment in the restoration, preservation and display of both ancient and modern artefacts in museums and at archaeological sites. To this end, Vision 2030 has set a target of more than doubling the Kingdom’s number of UNESCO World Heritage sites by 2030.
In the sphere of entertainment, the development plan calls for the establishment of more venues for hosting events. While these are directed at improving the quality of life of Saudis, their impact on tourism would be significant as well. In May 2016 the General Entertainment Authority (GEA) was established to develop this sector in line with the customs and traditions of the country. It aims to boost household expenditure on entertainment from a current 2.9% of income to 6% by 2030. Early GEA activities, including events and concerts across the country, have proven successful, with their initiatives reportedly creating some 20,000 jobs within the first seven months of operation.
Boston Consulting Group had also been commissioned to identify parks and theatres that might be used as entertainment venues in the future. In addition, the government has set up the “Daem” programme, a scheme designed to boost the number of clubs and associations in the Kingdom dedicated to leisure, hobbies, sport and cultural activities. The programme hopes to bring the total number of registered amateur clubs to over 450 by 2020.
One major sign of these changing times is the planned 334-sq-km Entertainment City, set to open in 2022. The venue, which is nearly the size of the US city of Las Vegas, will be built south of Riyadh, with construction commencing in 2018. Its attractions will include sports, cultural and other recreational facilities, including a safari park and a Six Flags theme park, with the US company announcing plans to build three such parks over the next few years, each costing between $300m and $500m.
Amid these grand plans, environmental preservation and sustainability considerations will be given high priority. Plans for the protection and rehabilitation of beaches, nature reserves and islands are specifically mentioned in Vision 2030, which welcomes the participation of the public and private sectors to achieve these goals.
Under the thriving economy theme, the issue of unemployment is firmly addressed. The primary targets for 2030 are reducing the unemployment rate from 11.6% to 7%, and raising women’s participation in the labour force from 22% to 30%. Labour-intensive services in the tourism sector could have an important role to play in this, as could the private sector. Vision 2030 forecasts the private sector boosting its share of the economy from 40% of GDP to 65%. In particular, rising prominence of small and medium-sized enterprises (SMEs) could be exceptionally beneficial, as many travel and tourism companies fall under this category.
The strategy describes travel and tourism as one of the Kingdom’s most promising sectors. The creation of attractions that are of the highest international standards, an improvement in visa issuance procedures for visitors, and the preparation and development of more historical and cultural sites are all highlighted as important components for long-term success. Funding for these areas is likely to come in part from the Public Investment Fund (PIF) – one of the world’s largest sovereign wealth funds – which will focus on supporting strategic domestic sectors. The PIF’s assets are set to increase from SR600bn ($159.9bn) to SR7trn ($1.8trn) over the plan period.
Broken down into a series of five-year plans to see the overall vision to completion, the National Transformation Programme (NTP) is the current version under way, taking the Kingdom from 2015 to 2020. So far, the NTP has been widely praised for setting highly specific goals, key performance indicators (KPIs) and tight timetables up to 2020, to keep the implementation of projects on target. This includes KPIs for the Ministry of Hajj and Umrah (MHU), the primary government body overseeing the annual pilgrimages, and the SCTH, the chief government body for the tourism sector.
The MHU has been tasked with increasing the annual number of Hajj pilgrims from 1.5m to 2.5m, while also raising the annual number of Umrah pilgrims coming into the Kingdom from 6m to 15m by 2020. To achieve these goals, the number of partnerships with the private sector is set to rise from one to 17. Increasing capacity will require more workers, and additional training and awareness programmes to improve the quality of service offered to pilgrims. The SCTH, meanwhile, will raise total tourism investment from SR145bn ($38.7bn) in 2015 to SR171.5bn ($45.7bn) by 2020, thereby elevating the number of direct jobs in the sector from 830,000 to 1.2m. This will partially stem from the additional five tourism destinations that should be up and running by 2020. Other SCTH goals under the NTP include: raising the number of museums from 155 to 241; visitable archaeological sites from 75 to 155; UNESCO World Heritage sites from four to 10; and archaeological heritage sites up from 10 to 28.
Other KPIs for the NTP include increasing value added from the sector from SR85.5bn ($22.8bn) to SR118.8bn ($31.7bn), total tourism spending from SR104.8bn ($27.9bn) to SR174.8bn ($46.6bn) and the number of tourists from 64.5m to 81.9m. Some 500 festivals and events are expected to take place in 2020, up from the current benchmark of 300, while tourism’s contribution to GDP will rise to 3.1% from 2.9%, according to the NTP’s figures.
At the same time, the NTP predicts a notable rise in the number of hotel and hotel apartment rooms, from 446,603 to 621,600, with the total number of tourist facilities increasing from 57,279 to 77,740. Essentially, if the KPIs are met, the Saudi tourism sector is about to undergo a sizeable seismic shift.
The SCTH has identified seven central projects that will be of utmost importance in achieving its 2020 and 2030 goals. Five of these are specific destinations, all of which will be developed via public-private partnerships: Al Ula, the district spanning Tabuk and Medina provinces that includes the Mada’in Saleh site; Ras Al Abyadh, a beach area on the Red Sea coast near Medina and Yanbu; Souk Okaz, an historic oasis area near Taif; Al Uqair, on the eastern coast, offering waterfront activities; and Farasan Island in the Red Sea.
In addition, the urban centres of Jeddah, Makkah, Taif and Dammam will receive special attention, as will the religious centres of Makkah and Medina, and the Red Sea area more generally.
To encourage private sector involvement, the Ministry of Finance (MoF) has also been brought on-board to provide loans. Meanwhile, the SCTH is working with the Saudi Industrial Development Fund’s Kafalah Programme to provide loans for SMEs. Some SR3bn ($799.8m) has so far been allocated to fund hotel and tourism projects through to 2020, according to the commission. As of March 2017 eight funding requests, worth a total SR424m ($133m), had been submitted to the MoF.
While potential domestic tourists are a major focus of government efforts, Prince Sultan bin Salman bin Abdulaziz Al Saud, chairperson and president of the SCTH, announced plans to start issuing tourist visas in 2018, which would help open up the country to foreign tourism. Until this occurs, however, religious, family, business, student, work, diplomatic and government visas are available.
Holidays At Home
There is huge potential for domestic tourism. From almost 24m trips in 2010 to around 50m trips in 2016, domestic tourism flows achieved a CAGR of 13% during this period. Looking ahead, the SCTH has set a target of 66m domestic trips and 24m inbound trips for 2020.
Increasing the popularity of domestic vacations for Saudis is therefore a prioritised task, as SCTH research revealed that there was a five-fold increase in the number of outbound Saudi tourists between 2004 and 2014. Some 44% of these travellers left the Kingdom for leisure and shopping purposes, with 29% heading to Bahrain, 22% to the UAE and 19% to other nations in the GCC region.
To achieve a shift towards vacationing in the country, facilities to draw back those heading abroad will have to be improved. There are already signs of this taking place, as a greater emphasis has been put on providing entertainment facilities by the GEA, and there has been a significant increase in investment into beach resorts at destinations such as Farasan Island, Ras Al Abyadh and Al Uqair.
Similarly, expansion of hotel and transport capacity is vital. In terms of the former, 68 new hotels were planned to open in 2017, accounting for an additional 29,033 rooms, according to a report by Top Hotel Projects, an industry database. There is an array of hotel expansions in the pipeline, such as: Rezidor Hotel Group announcing the opening of 11 hotels across the country in 2017; the opening of Abraj Kudai Towers – which is set to become the world’s largest hotel with over 10,000 rooms – in Makkah at the end of 2017; and multiple new developments in Jeddah, Riyadh and Al Khobar. International brands making their entrance in 2017 include UK-based Rocco Forte Hotels and Nobu Hospitality, founded in the US. Many of the new hotels are part of larger developments that also involve retail, commercial, or meetings, incentives, conferences and exhibition (MICE) facilities. In particular, MICE tourism is an area that the SCTH is keen to develop (see analysis).
In terms of transport, early 2017 saw approval given for two new airports to be developed at Sudair City for Industry and Business, and on the Riyadh-Hawtat Rani Tamim Road. These will help facilitate domestic links to the developing northern industrial cluster and the south-eastern development cluster. Meanwhile, in mid-2017 Singaporean Changi Airport Group won a bid to operate Jeddah’s new 105-sq-km King Abdulaziz International Airport for the next 20 years as part of the government’s efforts to support state financing. Terminal 5 of Riyadh’s King Khalid International Airport was privatised in 2016, and all remaining airports are due to be sold off between 2018 and 2020 (see Transport chapter). International investors are being encouraged to participate in this process, and there is no obligation for bidders to have a Saudi partner. Other transport projects that may benefit tourism include the expansion of Saudi railways. Under these plans, the first high-speed passenger services between Riyadh and Al Qassim began in February 2017, and further network expansions are also in the works.
These are pivotal times for Saudi Arabia’s tourism sector. The government is mobilising significant investment and building momentum as never before. Opportunities for companies exist across a whole range of services, from hotel architects to destination management outfits. While the KPIs of the NTP and Vision 2030 may be ambitious, issues like employment, and sustainable economic growth and diversification are being given due attention. The years ahead will provide opportunities for local and foreign investors alike as Saudi borders open.
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