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 to Islam attract visitors from around the globe, making it one of the most visited countries in the world. However, the tourism and entertainment sector in Saudi Arabia is on the cusp of a major change. Under the umbrella of the Vision 2030 programme, the government has set out ambitious tourism development initiatives and ushered in a series of multibillion-dollar investment projects to build new resorts, hotels and cultural attractions. However, development is set to pose both opportunities, and competitive and cultural challenges.
Structure & Oversight
The two main bodies tasked with overseeing the Kingdom’s tourism sector are the Ministry of Hajj and Umrah, which manages annual pilgrimages to Medina and Makkah, and the Saudi Commission for Tourism and National Heritage (SCTH), which is tasked with general tourism organisation, development and promotion.
In May 2016 the General Entertainment Authority (GEA) was established with the goal of developing and promoting the domestic entertainment industry while keeping with the customs and traditions of the country. Early GEA activities, including events and concerts, have proven successful, with their initiatives reportedly creating some 20,000 jobs within the first seven months of operation.
Performance
According to the “Travel & Tourism Economic Impact 2018 Saudi Arabia” report, published by the World Travel and Tourism Council (WTTC), the direct contribution of travel and tourism to GDP was SR88.2bn ($23.5bn) in 2017, representing 3.4% of all economic activity. This figure is expected to grow by 3.7% per year to hit SR131.3bn ($35bn), or 3.6% of GDP, by 2028. The sector’s total contribution to GDP, meanwhile, reached SR240.9bn ($64.2bn) in 2017, or 9.4% of GDP, and was projected to rise to SR399.5bn ($106.5bn), comprising 10.9% of economic activity in 2028.
Domestic travellers account for the largest share of tourism spending at 57% of the total; thus, attracting international visitors remains a key objective for the government. Total visitor exports in 2017 reached SR49.5bn ($13.2bn). This figure was forecast to grow by 4.4% in 2018 to SR51.7bn ($13.8bn), and by 3.9% per annum over the next decade to reach SR75.8bn ($20.2bn) in 2028.
The sector has also drawn in considerable investment. Travel and tourism attracted some SR90.8bn ($24.2bn) in 2017, or 15.6% of total investment in the Kingdom. Again, WTTC projections show figures continuing to increase, with funding expected to rise by 6% per year to hit SR170.4bn ($45.4bn) in 2028, at which time it will comprise 19.9% of all funding.
To compare at the global level, Saudi Arabia ranked 19th out of 185 countries surveyed by the WTTC in 2017 in terms of travel and tourism’s contribution to GDP in absolute value terms. It placed 27th in terms of the total number of jobs directly generated and 31st in terms of revenues from visitors. However, the Kingdom scored lower when the relative impact of travel and tourism is assessed, indicting a significant room for expansion. Saudi Arabia ranked 95th in terms of its direct contribution as a proportion of GDP (3.4%), 55th in terms of the direct contribution to employment (5.3%) and 123rd in terms of visitor exports (5.8% of total exports).
Tourism Policy
Tourism and travel is one of the priorities of Vision 2030, details of which were made public by the then-Deputy Crown Prince Mohammed bin Salman bin Abdulaziz Al Saud in April 2016. The central tenet of Vision 2030 stresses diversification away from hydrocarbons as the preferred route to achieving a thriving economy. This will be done by reducing the Kingdom’s dependence on oil and gas and developing public service sectors such as health, education, infrastructure, recreation and tourism. Transforming the role of tourism in Saudi Arabia is a major task, which brings with it opportunities and challenges. Until recently, the only foreigners admitted into the Kingdom were either on business, visiting families or coming for the Hajj and Umrah pilgrimages to Makkah and Medina, presenting limited options for travel beyond the holy sites.
The first steps towards tourism development have already been taken. Among them, the authorities have begun liberalising the visa process to include tourists as an official category of visitors. Considerable work has also been done on developing new attractions for travellers. The visa changes were phased in gradually over 2018. In April the first tourist visas became available through official government-licensed tourist agencies, then in the following December authorities began issuing tourist visas via an online platform to visitors wanting to attend sporting events and concerts.
The online platform came as the country was preparing to host the 2018 Saudia Ad Diriyah E-Prix races in December, marking the first time such an event was held in the Kingdom or the Middle East. Prince Abdulaziz bin Turki Al Faisal Al Saud, deputy chairman of the General Sport Authority, welcomed the development, telling local media that “This is truly a game-changing moment for Saudi Arabia, and one that we can share with the world”.
Ancient Civilisations
In terms of cultural and historic attractions, there are more than 4000 registered archaeological sites across the Kingdom. The Arabian Peninsula has been inhabited for thousands of years, and numerous civilisations have left their mark over that time. Among the major opportunities is the development of the Kingdom’s largest-ever archaeological survey. In July 2018 the Royal Commission for Al Ula (RCU) was created. The RCU is charged with surveying 22,500 sq km of desert area in the north-west that is home to thousands of archaeological findings, including an ancient ghost town and elaborate tombs. The region is expected to be open to visitors within four years’ time and to have the capacity for 1.5m visitors every year by 2030. To compare, Petra, an archaeological site in neighbouring Jordan, currently attracts around 460,000 annual visitors, while Egypt hosts 5.4m visitors per year across all its sites. Under a 10-year cooperation agreement with the French government, the RCU will develop hotels, transport infrastructure, and a culture and art museum.
Saudi Arabia’s archaeological offerings also include four UNESCO World Heritage sites, which Vision 2030 has set a target of more than doubling by 2030. The Nabataean city of Mada’in Saleh, prized for its palaces sculpted into rock formations, is located in the northern section of the Medina region and dates back to at least the 9th century BCE. Mada’in Saleh is currently closed to visitors; however, the authorities are planning to reopen the city when the commission decides how best to balance the influx of traffic with the need to protect and preserve the monuments.
Other UNESCO World Heritage sites include the early primitive rock art sites in the Ha’il region, Historic Jeddah and the former capital of the Saudi dynasty, the At Turaif District in ad Dir’iyah.
Red Sea Project
The beginning of 2019 saw construction start on the Red Sea Project, the first major tourism development announced since the launch of Vision 2030. The project will encompass 160 km of sandy coastline and cover 34,000 sq km across a lagoon with 50 natural islands. Beach-front resorts, hotels and residential units will allow travellers access to various natural sites and leisure activities. The project is being overseen and funded by the Public Investment Fund (PIF) – one of the world’s largest sovereign wealth funds – and is expected to open to visitors in 2022. According to PIF, tourism represents the second-most important sector in the Kingdom, and the Red Sea Project is set to spearhead the diversification of the leisure industry.
As with other tourism projects, the government has set up an international board of directors to oversee construction and development, as well as attract foreign direct investment. Speaking in October 2018 to industry media John Pagano, the CEO of the Red Sea Development Company, said that attractions would include a nature reserve, scuba diving in coral reefs and heritage sites.
Amaala
Part of the Kingdom’s ambitious plans to develop the Red Sea will involve the offering of highend experiences, such as the ultra-luxury resort Amaala. Located further north along the coast from the Red Sea Project, the Amaala will cover an area of 3800 sq km and is aimed at attracting the top 2.5m global leisure travellers to the so-called “Riveria of the Middle East”. Partially funded by PIF, the development will add four 18-hole golf courses, 2500 luxury hotel keys, and 700 villas and apartments to the country’s hotel stock.
Amenities will include a dedicated airport, yearround mooring for yachts, and boutique luxury cruises and diving trips to coral reefs. The site will also use galleries, atelier workshops and an art academy to showcase the works of artists and musicians from Saudi Arabia and the Middle East.
Nicholas Naples, the CEO of the Amaala Project, told local media in September 2018 that the project’s developers aim to reposition the luxury and high-end tourism concept with a special emphasis on “wellness, healthy living and meditation”.
Amusement Parks
In late April 2018 construction began on the Qiddiya project, an entertainment, sports and cultural precinct located 40 km southwest of Riyadh. The 334-sq-km site has plans for six entertainment clusters, including a theme park, sport arenas, motor tracks, water and snow sport facilities, vacation homes and venues to host cultural activities. Phase one is scheduled for completion in 2022, and by 2030 the project is expected to generate approximately 57,000 jobs and contribute about SR17bn ($4.5bn) to GDP.
According to PIF, the Qiddiya project aims to attract 17m entertainment visitors, 12m for shopping and 2m visitors for hospitality by 2030. In comparison, the world’s most visited amusement park, Magic Kingdom at Walt Disney World in Florida, attracted 20.4m visitors in 2016; followed by Disneyland in California, with 17.9m visitors; and Tokyo Disneyland in Japan, with 16.5m.
Cultural Sensitivities
An important area for the Kingdom’s tourism authorities to address will be the risk of a cultural clash between the lifestyles and behaviour of larger numbers of incoming tourists and religiously conservative sectors of the domestic population. Women in Saudi Arabia are required to wear headscarves and abayas (long cloaks) in public, and until June 2018, they were not allowed to drive. Drinking alcohol is also strictly prohibited.
Future tourism arrangements will need to engineer a balance over issues such as dress codes and behaviours so that they are seen as acceptable and respectful to both the hosts and the visitors. In a statement on its Red Sea plans, PIF implied that the dress code and other conservative social rules might be relaxed in resort areas, which will be governed by independent legal frameworks more comparable with international standards.
Domestic Entertainment
Part of government policy is focused on developing the domestic tourism and entertainment sector. The first steps in this direction have coincided with far-reaching reforms, including permitting women to drive and lifting a 30-year ban on cinemas. The GEA says it has plans to spend up to $64bn on developing the entertainment sector alone, in line with a more liberal approach to entertainment, but without clashing with the country’s conservative cultural traditions. In 2018 GEA-sponsored events included non-gender-segregated live concerts and the opening of Riyadh’s first cinema. According to Flanders Investment and Trade, the cinema segment could generate 1000 direct jobs and contribute SR1bn ($266.6m) to GDP by 2020.
The GEA reportedly organised an estimated 5000 culture and entertainment-related events during the course of 2018, including some provided by international companies such as the US’ Disney and Marvel, and Canada’s Cirque du Soleil.
Amr Banaja, CEO of the GEA, said the authority aims to generate SAR16.5bn ($4.4bn) in revenue and create 70,000 jobs within the entertainment industry by 2030. “We believe we have a captive and young audience; we have social acceptance now,” Banaja said in an 2018 interview with local media. “In 2019 we can test these assumptions. The demand is there; we now want to test the monetisation.”
In addition to talking to international investors, the GEA is also offering training and loans to small and medium-sized Saudi companies in an effort to develop a locally based and sustainable entertainment industry. Banaja recognised that the increase in entertainment activity and non-gender-segregated events needed to take into account local cultural and religious sensitivities. “There are religious and cultural norms where we definitely would not cross the line,” Banaja told local media. “We want to be relevant in what we offer, but we also need to take into account local cultural norms.”
Developing major domestic entertainment attractions may have the added beneficial effects of encouraging more Saudis to travel domestically, rather than spending their money in foreign destinations. By one estimate, as many as 250,000 Saudis travel to Bahrain on any given weekend.
Religious Tourism
A series of new government initiatives also hopes to double the number of pilgrims visiting the country from 19.1m in 2017 to 30m by 2030. 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 latest efforts, however, are intended to encourage pilgrims to extend their stay. In September 2018 it was announced that travellers holding a 30-day Umrah visa would be permitted to spend 15 days travelling outside Medina and Makkah.
To further these efforts, Saudi Arabia will need to extend its leisure and hospitality offerings beyond luxury-focused attractions. Many of the pilgrims come from countries with relatively low income levels, and therefore may not have the financial capacity to extend their stay and visit other sites. In 2016 just over 2m religious visitors came from Kuwait, which has a per capita GDP of over $20,000. Otherwise, the bulk of pilgrims come from countries with much lower levels of income, such as Pakistan, Indonesia and Bangladesh.
Employment
Vision 2030’s economic diversification goals to promote tourism will provide key opportunities for job growth. Travel and tourism directly and indirectly employed an estimated 322.6m people in 2018, meaning that nearly one in 10 workers in the country was employed in the industry, according to the WTTC. Over the next decade, this figure is expected to increase to 413.6m jobs and account for 11.6% of total employment countrywide.
The expected 40% increase in domestic tourism by 2020 means Saudi officials will need to train adequate human resources. In October 2018 the Ministry of Labour and Social Development and the SCTH signed an agreement to train unemployed workers in hospitality management.
The programme targets an estimated 60,000 Saudi nationals currently receiving social security payments. Those joining the programme would be offered free housing, as well as subsidised water, electricity and medical insurance.
Technology in Tourism
As the government pushes on with its plans for developing the tourism sector, officials have expressed enthusiasm for incorporating technology to make the visitor’s experience as seamless as possible.
A pilot programme started in 2018, for example, allows religious pilgrims from Indonesia and Malaysia to file biometric data in their home countries before travelling to Saudi Arabia. This allows them to pass through passport control in a quicker and easier manner. Naji Mohammed Al Qahtani, director-general of IT at the Ministry of Interior (MoI), told local media that the pilot programme had been successful in reducing the queuing time for fingerprints at airport arrival terminals during peak Hajj and Umrah travel seasons.
The ministry is looking at ways of rolling out the programme to include other nationalities, with plans to eventually extend the service to non-religious tourists. The MoI was also considering other initiatives to speed up arrivals procedures, including the creation of a centralised online platform to share customs, immigration, police and security data.
The SCTH is also embracing tech solutions by partnering with Dubai-based ride-hailing app Careem to help users better plan their visits to popular sites. A tourism guide service will be built into the app, offering information about visitor attractions.
NEOM
Additionally, large-scale innovation and technology projects are set to have an effect on tourism. The launch of a $500bn private industrial zone dubbed NEOM was announced in October 2017. Stretching over Saudi Arabia, Jordan and Egypt, the project aims to bring investors, businesses, consultants and innovators at every stage of development to a place where they can work and live. It is intended that the NEOM project will also host 16 economic sectors, including tourism, which will develop internationally competitive economic activities.
Business Travel
As part of the wider economic reforms under way, officials say they are placing particular emphasis on developing business travel, particularly the meetings, incentives, conferences and exhibitions (MICE) segment.
The MICE industry reportedly grew by 16% in 2017, with around 4.5m attendees taking part in more than 10,000 business events. Meanwhile, business travel spending was estimated at SR23.9bn ($6.4bn) in 2018, representing around one-fifth of all travel-related expenditure in the country, according to the WTTC. Most of the events are held in the capital city of Riyadh, although authorities are keen to bring MICE events to different parts of the country.
At the beginning of 2019 an estimated 50 fourand five-star hotels were under construction, which will add a combined capacity of 11,000 high-end rooms. Meanwhile, across all hotel categories, there were over 140 hotel projects under construction, offering 55,810 extra beds. To ensure that the MICE sector helps fill a share of the new rooms being built, the Saudi Exhibitions and Convention Bureau is running the Envoy Programme to encourage government and business officials to engage with international bodies and promote Saudi Arabia as a conference destination.
Outlook
Saudi Arabia’s tourism sector is set to witness significant activity in the years ahead, especially as the development of major attractions pushes ahead, and the range of entertainment and leisure activities continues to expand. A January 2018 report published by BMI Research indicates that tourism receipts could increase by 5.8% per year between 2018 and 2022.
Key to the sector’s success will be the ability to effectively market the Kingdom as a tourism destination. To this end, high-profile events such as the Formula E Championship race in and several prominent developments along the country’s Red Sea coast bode well for tourism’s future success.
